Big city volume underpins rise in house sales

The  volume of house sales in the Central Otago Lakes area were up more than 50% during October,...
The volume of house sales in the Central Otago Lakes area were up more than 50% during October, while Queenstown (above) prices declined more than 10% compared with a year ago. Photo by Gerard O'Brien.
A surge of more than 30% in national house sales compared with a year ago reflects more strengthening in the residential house market - underpinned by big city sales - with economists predicting more of the same.

However, mixed regional trends beyond the cities were reflected in the Central Otago Lakes area being the largest gainer in sales numbers at 54%, compared with October last year, but that gain came at a cost to sub-region Queenstown with a more than $58,000 decline in its median prices.

With the rebuilding in Canterbury forecast to boost construction and sales, the Reserve Bank is not expected to be overly concerned at the rising prices and volumes, for the time being.

Nationally, the median house price hit a record of $380,000 while sales volumes on October last year rose 32.6%, or by 1633 homes, to 6640 unconditional sales in October. Auckland booked a record $530,000 for its median price.

In Otago, the median house price rose 3.4% to $240,000, while sales volumes on October last year rose 12.2%%, or by 28 homes, to 257 sales in October.

In the Central Otago Lakes area, encompassing Central Otago and Queenstown, the median house price declined by $13,500, or 3.2%, but sales volumes rose 54%, from 68 a year ago to 105 for October, only just ahead of Northland and Hawkes Bay.

ASB senior economist Jane Turner said the Real Estate Institute of New Zealand house sales figures, released yesterday, surged during October, lifting 16% month-on-month and were 33% higher on levels in October a year ago.

Residential and section sales for October rose 46% from $2.15 billion in October a year ago to $3.15 billion last month, while residential sales for the year to October stood at $32.5 billion.

Again, the rise in prices was led by Auckland, surging 5.3% over the month to be 14% higher on year-ago levels, Canterbury lifted firmly, up 1.4% over the month to be 7% higher on year-ago levels, while Wellington prices were starting to pick up; now 3.5% higher on levels of a year ago, Ms Turner said.

REINZ chief executive Helen O'Sullivan said although sales volumes rose across the country, prices did not automatically follow.

"The market is very much in two parts - the metropolitan regions of Auckland, Wellington and Christchurch [are] where prices are rising, and the rest of the country where price trends are mixed," she said in a statement.

Queenstown had sales rise from 33 a year ago to 45 now, but prices dropped from a median $575,750 to $517,000 - a decline of more than 10%, or $58,750.

Westpac chief economist Dominick Stephens said the acceleration in house prices "may be stunning", but it was not surprising, given the low interest rates.

"Mortgage rates have fallen very sharply, and as night follows day, the housing market has responded," he said in a statement.

If the profile of surging house sales is an indicator, the bout of house inflation is about to "radiate out of Auckland" to other regions around the the country, he said.

The rise in demand for housing was at odds with this week's surprisingly weak employment figures, which would have typically weighed heavy on household confidence and housing demand, Ms Turner said.

The Reserve Bank appeared "relatively relaxed" about the housing activity and it also expected an increase in new housing construction during the year would help ease pressures, she said.

However, the Reserve Bank, in its recent financial stability review, noted some concerns about the recent increase in prices, in that rises could heighten the risk of a sharp downward price correction in the future, she said.

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