Have your say: auction property numbers plunge, yet NZ's average house price passes a million dollars! What do you think of high house prices nationwide?

House prices rise across New Zealand

In less than a year, New Zealand house prices have reached a new milestone: the national average has exceeded NZ$1,000,000 for the first time. That is a harsh reality for anyone! According to the latest OneRoof-Valocity data, the national average house price rose 4.9% over the past three months and has risen 27% since September 2020. In less than ten years, the national average house price has doubled!

 

Image source: OneRoof

This means first-home buyers need a deposit of NZ$200,000, more than three times the average annual salary, to buy a home. Based on a 20% deposit under LVR requirements, buyers now need an extra NZ$50,000 compared with the previous year to assemble their deposit, while the total purchase cost has increased by around NZ$213,000.

Image source: OneRoof

 

The charts above show that house prices in Gisborne, Manawatu-Whanganui, Wellington, Hawke's Bay and Bay of Plenty rose by more than 30% over the past year. These enormous increases have also pushed average prices in Wellington and Tauranga above NZ$1,000,000, joining Auckland and Queenstown Lakes in the million-dollar club. Hamilton, Napier, Hastings, Nelson and Whangarei are close behind and approaching the million-dollar mark!

 

Readers will clearly remember that Auckland's average house price first passed the NZ$1,000,000 mark in August 2016. In October 2020, its median house price exceeded NZ$1,000,000, reaching NZ$1,045,000. Auckland house prices had doubled over a decade. Today, Auckland remains New Zealand's most expensive city for housing, with an average house price of NZ$1,415,000, up 24% year on year. The country's least expensive region is the West Coast, where the average house price is NZ$353,000.

 

Fewer properties at auction, but higher clearance rates

 

Meanwhile, residential auction activity in Auckland continues to decline steadily as Alert Level 4 restrictions reduce the number of properties available for sale. Last week, from 4 September to 10, Auckland's largest real estate agency, B&T, auctioned just 27 properties. That was a significant drop from the 163 auctioned in the week from 7 August to 13, before Alert Level 4 lockdown began. Since restrictions were introduced, auction numbers have fallen each week and could fall further. Nevertheless, auction success rates have been impressive, with 70% of properties offered last week attracting successful bids. Over the past four weeks, the auction clearance rate has risen from 62% to 77%.

 

Although viewings and auctions can take place online during lockdown, many buyers cannot bid because they cannot attend open homes in person or arrange building inspection reports. Sellers are also affected, finding it difficult or even impossible to arrange services such as photography, home staging and renovations. As the outbreak improves and restrictions potentially ease, buyers and sellers may ultimately choose to postpone auctions until normal marketing can resume. Of course, even if restrictions were eased now, the auction market would need at least a month to return to normal, as most campaigns take a week to plan and run for around three weeks before auction. OneRoof predicts that house prices could rise further once New Zealand fully exits lockdown, driven by pent-up buying and selling demand. Buyers will also try to lock in their mortgage rates before bank interest rates rise.

 

The Reserve Bank's Official Cash Rate (OCR) remains at a historic low

Image source: OneRoof

 

The Government's position

 

The New Zealand Government and the Reserve Bank have taken measures aimed at cooling house prices and creating a level playing field for first-home buyers. These include reducing investors' loan-to-value limits and extending the bright-line test to 10 years. Housing Minister Megan Woods said: 'Some of the housing policies we announced earlier this year have already tilted the balance towards first-home buyers, such as changes to interest deductibility for property investors, along with the NZ$3,800,000 Housing Acceleration Fund, which has yet to launch and aims to enable more affordable homes to be built.'

 

Have your say: what do you think of high house prices nationwide?

 

First Home Buyers Club director Lesley Harris said recent changes to LVR restrictions had provided no meaningful help to first-home buyers. The Reserve Bank had made no changes to help them save money or obtain a home loan!

 

Green MP Chloe Swarbrick said an average house price of NZ$1,000,000 was utterly devastating, and not just for young people. She had friends in their thirties and forties who felt they would never be able to afford a home, while the number of pensioners without property was also rising. She believed the Government had a responsibility to intervene in house prices. 

 

Swarbrick said the Government had a duty to intervene and urged ministers to end interest-only mortgages and introduce a capital gains tax to help raise revenue for developing more homes. She also called for stronger rights for renters and greater regulation of the rental market.

 

Former Reserve Bank chair and former Financial Markets Authority board member Arthur Grimes described the current housing market as 'crazy'. He said: 'It is shocking to pay NZ$1,000,000 for a house in a country like New Zealand, with so much unused land and so few people... This will worsen inequality, making the rich richer and the poor poorer, and nobody seems willing to do anything about it.'

 

ASB chief economist Nick Tuffley said access to the 'Bank of Mum and Dad' had become more important for first-home buyers. He said the focus needed to be on reducing house-building costs, noting that other countries were better than New Zealand at producing housing at scale.

 

Valocity director of valuations James Wilson said property values were at a crisis point and, if left unchecked, would have a profound effect on buying and selling behaviour. 'If we do not address this, the outlook for future generations is bleak. The rate of growth may slow, but prices will not fall back. They will keep rising. Fewer properties will change hands, and the housing market will be accessible to only a small section of society.'

 

'Yuanfang, what do you think?' Share your views in the comments below this article and join the discussion!