Peter Thompson: Promising stirrings for housing market

Peter Thompson, Managing Director, Barfoot & Thompson
Peter Thompson: Promising stirrings for housing market
The median and average sales prices in New Zealand remain rock solid

The outlook for residential property sales across the country until year end are promising and given prevailing economic conditions, are likely to remain that way until the end of the late autumn selling season, which coincides with the start of the run in to the 2020 General Election.

We reported the positive market stirrings at the start of October when we released our September sales figures.

Sales numbers were excellent with new listings also up. The median and average sales prices remained rock solid.

The trend we identified was confirmed mid-month when the Real Estate Institute released the national sales data information for September. 

The year-on-year September median sales price was up 6.6% and year-on-year sales numbers had increased 3.3%.

The release of REINZ’s figures led to Westpac promptly reminding the market that back in May its independent economic unit was forecasting a 7% lift in residential housing prices in 2020.

Westpac commented the September sales data supported its economists’ “bullish near-term view on house prices”.

While those who maintain that residential property prices are at unsustainable high levels and that an inevitable downturn is only a matter of time it is a lot more muted these days, there are still many who hold to this view.

The counter facts are those with the economic ability to do so are continuing to invest in their home, either by trading up or undertaking renovations.

It adds to their sense of well being, security and stability.

They are prepared to make other financial sacrifices if the investment in their home gives them the ability to live the lifestyle they want, in the location they want to live. It’s their preferred choice.

We are now more than two years on from the point when the Auckland market peaked in terms of prices in April/May 2017.

Since that time, based on our sales data, sales numbers and prices have stayed pretty much in line with where they were for the 2017 calendar year.

There has been ample time for prices to realign themselves downwards if that is what was going to happen.

The Auckland market has realigned itself – to 2017’s position - and now may be poised to return to a modest growth phase.

Meanwhile, the rest of the country has spent the last two years closing the gap between their prices and those of Auckland.

Backing up this newfound confidence in the Auckland market is current mortgage interest rates, which are at record low levels.

These are not forecast to increase anytime soon.  In fact, Westpac is even forecasting one more cut to the official cash rate (OCR) before rates bottom.

Another factor is the continued rise in Auckland’s population, in part through natural growth, and also through internal and overseas inflows.   

While Auckland is amid an infrastructure and building boom, the rapid growth in the number of houses, town houses, apartments and terraced houses has not closed the gap between supply and demand.

What has occurred, however, is there has been a dramatic change in the type of housing being built.

In Auckland, the concept of the ideal home being a stand alone property in a leafy suburb is being replaced by a desire for contemporary architecture; maximisation of land area; open plan with indoor/outdoor flow and large outdoor entertaining areas; easy maintenance; and a location convenient to work, transportation corridors and lifestyle activities.  

What is inevitable is Auckland accommodation will continue to evolve as it continues its transformation into a large, international city and the population modifies the way it moves around the City.

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