Westpac NZ economists went out on a limb in May and predicted that the housing market would rise 7 per cent in 2020 – and the latest data suggests their bullish prediction could be on track.
The Westpac NZ economists – a separate and independent unit to the bank – predicted that record-low interest rates and the ruling out of a Capital Gains Tax would spark the housing markets back into life.
“At the time, Westpac was the only major economic forecaster with a bullish near-term view on house prices,” the bank’s Chief Economist Dominick Stephens says.
Today, the Real Estate Institute of New Zealand (REINZ) released figures showing median house prices across New Zealand increased by 6.6% in September.
Stephens said REINZ’s House Price Index had a slow increase over June and July but in August and September, “the pace of price increases appears to have stepped up”.
“Using our own seasonal adjustment, we estimate that New Zealand house prices have risen 2.6% over two months. In Auckland, prices have gone from outright decline early in the year to an increase of 2.0% over the past two months.”
REINZ’s House Price Index has seen property values increase 3.6% annually.
Auckland has seen a median price increase of 0.2% since September 2018, rising to $848,000, up from $846,000.
The rest of the country, excluding Auckland, has risen 6.8% since September last year, rising to a record high of $500,000, up from $468,000.
The areas with the largest growth and record median prices were recorded in Manawatu/Whanganui, Southland, Taranaki and Hawke’s Bay, seeing increases of 24.1%, 22.1%, 15.9% and 13.4% respectively.
Regions which experienced a decrease in median prices annually were the West Coast, Northland and Nelson, declining by –7.5%, -5.5% and –5.4% respectively.
“Median prices are lifting as a result of a number of influences such as the Official Cash Rate (OCR) drop back in August which is slowly injecting more confidence into the market and the continued lack of supply across many parts of the country,” Chief Executive at REINZ Bindi Norwell says.
The REINZ’s latest data has left Westpac’s economists comfortable with their long-held views of the market.
“Our expectation remains that low interest rates will boost asset prices, including lifting house price inflation to 7% per annum,” Stephens said.
“That will give a short-term boost to consumer spending, which combined with the Government’s loosening of the reins, will spark slightly higher rates of GDP growth next year than we have experienced this year.
“This is important information for the Reserve Bank, which is not forecasting a pickup in the housing market.
“We are forecasting one further OCR reduction and no more,” he said.