The latest Reserve Bank bulletin contained few surprises for those who watch the real estate market.
The well-informed sages at the RBNZ say house prices in New Zealand have “risen significantly over the past five decades”. And that in real terms, house prices have more than tripled.
Interestingly, the report says house price movements in Auckland contain some predictive guides for prices in other regions. Pointing to the Auckland-driven upswing of the 1990s, it says house prices subsequently increased in nearby regions — the so-called ripple effect, and something we are currently witnessing.
The RBNZ says that since mid-2012, Auckland house prices have increased 52 per cent, but house prices in the rest of New Zealand have gone up by just 11 per cent.
The extent of this divergence is “unprecedented” says the report’s authors. However, they also say that when Auckland house prices have previously gone up significantly compared to those in the rest of the country, the gap eventually starts to close.
Talking about interest rates is almost a full time occupation around the office, as we consider how the global economy, migration, currency prices, the dairy price, falling oil prices, China and the US impact on New Zealand.
Something only has to be a hair out of place and the ripples wash across the economic world — it’s great to watch.
So when Graeme Wheeler, head of our Reserve Bank, announced no change to the official cash rate last week there were no surprises. He would have been seen as weak if he made another cut so quickly after the last one. But I remain certain the cuts must come.
Just released end-of-year migration figures show that during 2015 New Zealand had a record annual net intake of 64,900 people.
A monthly record 5600 people entered the country in November, and in December the figure was down to 5500 — could this be the start of a downward trend? Only time will tell. What we do know is 30,000 people settled in Auckland last year (7000 more than in 2014).
Tony Alexander, chief economist at BNZ, says Auckland house prices will stay high.
Writing in his weekly newsletter, following the annual Demographia Report that showed Auckland is one of the least affordable cities in the world to live in, he says the fundamentals contributing to the issue will not change for decades.
He says contributing factors to high house prices include low interest rates, lack of new builds, high construction costs (have you seen the price of timber at the local DIY store?), and rapid population growth.
According to a survey by real estate firm Barfoot & Thompson nearly a third of Auckland homeowners search property listings all the time.
It says people look so frequently that it has become pastime for Aucklanders, with nearly a third of the city’s homeowners saying they search for property “all the time”, whether they are in the market or not.
A further 48 per cent say they “sometimes” search listings, despite not actually being in the market for a new home.
And just 21 per cent of those surveyed confine their searches to when they’re actually looking to buy.