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12/03/07 -
Property Prices in New Zealand Double |
New Zealand’s national residential property median price
has exactly doubled in ten years, according to the Real Estate Institute of New Zealand’s 2006 Annual Review...
The December 1997 median price was $165,000 and ten years later it has increased by 100 per cent to $330,000.
But in the last year, smaller provincial cities were the ‘winners on the day’ in the New Zealand residential
property market. Wanganui, Invercargill, Rotorua and Palmerston North lead the way with year-on-year price increases
in 2006, according to the Review.
Wanganui was the leading city over the last calendar year with its median residential price rising from $148,250 in
December 2005 to $181,000 in December 2006, an increase of 22.1 per cent. Second was Invercargill which recorded a
17.5 per cent increase in its residential median price from $139,500 in December 2005 to close at $164,000 in
December 2006. Rotorua took third place with a 16.1 per cent increase from $214,500 in December 2005 to $249,000 in
December 2006.
But while the provincial cities made most of the running in 2006 and the larger metropolitan areas lagged behind,
North Shore City was the exception, filling fourth place with a 14.4 per cent increase from $453,500 to $519,250.
Fifth place was Palmerston North City with a 14.3 per cent increase in median from $227,375 to $260,000.
Regional variations
On a regional basis the Taranaki region experienced the greatest price appreciation of the year with a 17.4 per cent
increase from $230,000 in December 2005 to $270,000 in December 2006, while Manawatu/Wanganui was second with a
16.53 per cent increase from $184,500 to $215,000.
Third was the Wellington region with a 15.5 per cent increase from $316,000 to $365,000, and Nelson/Marlborough was
fourth up 13.9 per cent from $281,000 to $320,000. Fifth Place was filled by Otago up 11.7 per cent from $205,000 to
$229,000.
The New Zealand national median price increased from $295,000 in December 2005 to $330,000 by December 2006.
A market dominated by uncertainty
National President of the Real Estate Institute Mr Murray Cleland, commenting on the Annual Review, said that the
market was very much dominated by uncertainty during the year especially over interest rates.
“The Reserve Bank and its Official Cash Rate cast a long shadow over the residential property market during 2006
and, as it turned out, probably unnecessarily so," Cleland said. “The year got off to a rather uncertain start and
constant rhetoric from the Reserve Bank introduced a growing note of uncertainty into the market, affecting buyer
confidence. By the middle of the year that concern had translated into a pretty flat market with the national median
price going into a yo-yo formation within a very narrow band of prices”.
The median price went from $310,000 in June to $313,000 in July, back to $310,000 in August and then back up to
$313,000 in September.
Cleland continued, “But the breakthrough came in October when the national median price broke through with a new
record of $324,000 and it was almost as if the property market was saying it had enough of the doom and gloom. Since
then the market has been a lot more buoyant and prices are firm."
In fact interest rates remained remarkably steady during the year with strong competition between banks to an extent
thwarting the Reserve Bank’s desire to talk rates down and dampen demand in the property market. That and the fact
that some 85 per cent of mortgages in New Zealand are now on a fixed rather than a floating rate meant that the
Reserve Bank’s efforts had little impact on interest rates.
Strong demand bodes well for 2007
Looking forward, Mr Cleland believes fundamental demand factors will ensure another good year for the residential
property market in 2007.
Cleland said, “The demand for houses is strong which is witnessed by the massive amount of new home construction –
an overdue reaction to a period of relatively low new home activity in recent years. We have strengthening net
migration which is another factor and of course we have a longstanding drift of internal migration as people
gravitate North, which will ensure that Auckland property prices will remain strong."
Mr Cleland said that the only downside to rising residential property prices was the question of affordability for
first home buyers. He said that the question of affordability was one essentially beyond the housing market itself
which was driven entirely by supply and demand.
Cleland concluded, “Affordability is really a question for central government to address, possibly in conjunction
with the private sector, and it would be good to see some greater initiatives in 2007 to assist first homebuyers
into home ownership which has long been demonstrated to have both economic and social benefits”. |
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