Last year was an extraordinary one in terms of the level to which house prices rose, and not unnaturally there are many wondering just where the market goes to from here in 2016.
I always make a point of not entering into a debate around where prices are heading on the principle that buying and selling a house is far too important a decision to cloud the issue by trying to correctly guess price movements.
Buying a house should be based around lifestyle preferences and an individual’s ability to service the mortgage in both the short and medium term.
From my perspective there is no clear picture as to the direction Auckland house prices will take and it may well be mid-March before a future trend emerges.
The data we have is sending a mixed message about 2016. While the average and median sales prices were at their highest ever at the end of December, there was a marked decline in the number of properties sold and the number of new listings reaching the market.
A number of our agents are reporting an encouraging level of interest from people who are considering selling, but they are taking a ‘wait and see where the market is heading’ approach before committing.
Economists and commentators seem divided on the issue. Some see November’s sales data as a sign prices have peaked while others are of the view that fundamentals around population growth and new builds will have to change before rising prices are tamed.
Can we learn from past trends?
Looking at past trading data for December and January is no real help.
The average sales price has risen year on year for the past 7 years. In 2 of those years December’s average price fell below that for November while for another 2 the increase was less than a few thousand dollars. In only 3 years did December’s average price increase over November’s by a marked amount.
For every one of the 7 years, January’s average sales price fell below that for the previous December.
It cautions me against taking sales data over the next few months and trying to read trends into it.
2015 was a year of massive growth
In the 11 months to the end of November, the average house price increased by 14%, which is a major rise no matter which way you look at it, and it is certainly higher than the rises experienced in the previous 3 years.
In 2014 the increase was 10%, in 2013 11%, and in 2012 8%
Taken in isolation these price increases over the past 4 years are startling. However, when you put them within the context of all the other significant developments taking place within Auckland – such as the extensive inner city commercial and retail construction, the groundwork for the underground transport system, and the Wynyard Quarter development – you have a city going through a tremendous growth spurt.
It has happened in the past, for example when the Harbour Bridge opened up the North Shore and the southern motorway, then farmland, to the south of the city.
We are living through a period of time when Auckland is repositioning itself into a world class metropolitan area.
It has become a lifestyle destination based around work opportunities, amenities, and climate.
Record lending may be a sign
The Reserve Bank released a statement saying that in the first week of December our trading banks have lent a record $1.6 billion in mortgages in the 7 days leading up to December 11.
Our banks take a vigorous approach when approving mortgages, and if they are confident that borrowers at today’s prices can continue to meet their mortgage obligations, it gives me confidence that the housing market remains financially sound.
Managing Director, Barfoot & Thompson
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