House price inflation rekindles but low sales volumes suggest caution
By Jenny Ruth
Sept. 13 (BusinessDesk) - House price inflation appears to be taking off again but sales volumes in August were down 6.1 percent from a year ago and at the lowest level in seven months.
The Real Estate Institute of New Zealand's house price index rose 2.9 percent in the year ended August, up from the 1.5 percent annual pace in July.
But only 5,959 homes sold in August, down from 6,118 in July and 6,346 in August last year.
REINZ chief executive Bindi Norwell says the low level of sales "was a bit of a surprise, given the strength of July's figures. However, an extremely wet August across most parts of the country and the past three months having the lowest number of new listings of any consecutive three months since records began in 2007 look to have been contributing factors."
Year-to-date, new listings are down 3,624 on the same period last year.
"With limited choice in many parts of the country in terms of new listings, we're hearing from a number of agents that people are waiting to purchase before they put their own property on the market, which is slowing the whole market down," Norwell says in a statement.
The Reserve Bank cut its official cash rate by 50 basis points to 1 percent on Aug. 7 and already low mortgage rates have also fallen.
For example, both ANZ Bank and ASB Bank have cut their floating rates by 50 basis points to 5.19 percent and 5.2 percent respectively and their two-year fixed rates, the most popular fixed period, by 26 basis points to 3.59 percent.
Kiwibank economist Jeremy Couchman says the fall in mortgage rate should entice some back into the market but the August results suggest people are still cautious.
"NZ still faces a severe shortage of affordable homes, which is slowly being addressed," Couchman says.
"We remain cautiously optimistic about the outlook for the housing market heading into 2020.
Annual house price inflation is more marked outside of Auckland, picking up from 6.5 percent in July to 6.8 percent in August, and is still negative on an annual basis in Auckland, down 1.5 percent.
However, prices in Auckland rose 1 percent in the month of August and by 1.4 percent in the three months ended August.
Auckland sales were down less than the national fall at 4.1 percent with 1,761 homes sold in August, the lowest number in four months.
Prices in Southland rose the most at 15.2 percent up on August last year, followed by Manawatu-Whanganui, up 13.6 percent, and Gisborne-Hawke's Bay, up 13.2 percent.
Apart from Auckland, the lowest rate of annual house price inflation was in Canterbury at 1.8 percent.