06 Apr Auckland Property
Source: NZ Herald – April 2013
The nationwide average house price is expected to rise 8.6 per cent by the end of the year, with Auckland’s average jumping 12 per cent, putting it close to $600,000.
Auckland house prices are predicted to rise a further 12 per cent over the next year, with the nationwide average jumping almost $40,000 by the end of the year.
And economists say there isn’t an end in sight, with panicking buyers and huge housing shortages continuing to drive the prices up.
Average nationwide prices are now 3.2 per cent above their 2007 peak level, according to a report compiled by Crockers Property and analyst company Infometrics.
The nationwide average house price is expected to rise 8.6 per cent by the end of the year, with Auckland’s average jumping 12 per cent, putting it close to $600,000.
The Bank of New Zealand’s chief economist, Tony Alexander, said the report’s predictions were in line with other estimates.
The rise is being mostly driven by domestic factors. “The biggest driving factor now is that people are accepting there is a housing shortage and that means there’s a lot of ‘catch-up buying’ in the market at the moment, Auckland in particular.”
Mr Alexander said during the global financial crisis, a lot of people held off buying a house and have been doing so since because they expected prices to fall.
“Now you’ve got four years’ worth of young buyers stacked on top of each other all trying to scramble into the market. You’ve got investors thinking prices will fall before they made another purchase … and now they also are catching up on purchases they might have made from 2009.
“So you’ve got two groups, the first-home buyers and the investors, just scrambling to catch up.”
Combined with the housing shortages and low interest rates, these factors have pushed Auckland prices to 31 per cent and Christchurch’s 29 per cent ahead of their 2009 low, Mr Alexander said. He expected house prices to continue to rise at a similar pace for the next three years. “We need to build 13,000 houses a year [in Auckland], but there’s nil and Buckley’s chance of doing that. There’s a long, long way to go before they even get to half of the required level and as the shortage gets worse, the prices go up.”
The Herald understands there are discussions being held about terms of reference between Auckland Council and the government working party established to tackle the city’s housing crisis.
Last month, Housing Minister Nick Smith and Auckland Mayor Len Brown emerged from an hour-long meeting after disagreeing on a council solution to give legal effect to a new planning rulebook to free up land for new homes from September.
Mr Alexander said there was no way Auckland could meet its housing needs because it wasn’t “physically possible for Auckland” to build 13,000 houses a year and the Christchurch rebuild would create labour shortages.
“The only thing that will stop the housing [cycle] is interest rates getting pushed to aggressively high levels and that isn’t going to happen for quite some time.”
The house-price growth meant first-home buyers would have to reassess expectations and needed to realise they’d have larger mortgages and source family and friends for their deposits, Mr Alexander said.
They would also need to look at suburbs further away from the city centre and look at joint-purchasing with someone else or consider an inner-city apartment instead of a house.
The director of Massey University’s Centre for Banking Studies, David Tripe, said the interesting question about the housing crisis was whether it meant there should be Reserve Bank intervention and what that might involve.
“The problem there is that it’s very hard to design a policy that impacts on Auckland only and that doesn’t impact on the rest of the country,” Dr Tripe said.
“It would be nice to say, ‘This is an awful social problem that has serious implications if we don’t stop it’, but in practical terms it’s not going to be quite as easy as that.”