Home Inspection News – Issue 20

New House Price Records in August 2018

An early spring for house prices nationally with New Zealand prices up 3.6% year on year and Auckland up 1.4% year on year. After 6 months of flat prices the regions set new median price records in August.

Gisborne increased 42.6% in the last 12 months to a new record median of $335,000. Tasman up 24.2% in the last 12 months to a new record median of $615,000. Manawatu / Wanganui rose by 10.5% in the last 12 months to a new median record of $315,000.

The total number of sales in New Zealand were slightly up compared to August 2017 from 6,028 to 6,216 (a 3.1% increase). The median days to sell nationally remained the same as August 2017 at 37 days.

The number of properties for sale throughout New Zealand decreased by 1.6% compared to August 2017 (21,555 in August 2017 compared to 21,207 in August 2018).

The GFC 10 years later

It is now 10 years since the Global Financial Crisis (GFC) of 2008 when Lehman’s Bank collapsed in September 2008 causing world-wide financial turmoil. At the time Lehman’s was the forth largest investment bank in the USA with over $600 billion in assets.

Property sales stalled, prices fell and interest rates increased. Economies in many developed countries were negatively impacted and went into recession. In New Zealand the effect on the economy and the housing market was much less severe than it was in the USA and in many other countries.

House prices fell a little under 9% in New Zealand in 2008 but increased over 5% gaining back more than half the 2008 loss in 2009. Since 2008 the population of New Zealand has grown by 14.0%. Auckland has grown by 21% or 295,000 people. The housing stock in New Zealand has grown by about 190,000.

House prices nationally have increased by an average of 62%, Wellington by 51%, Canterbury 44% and Auckland 91%. In the past 10 years wages have increased on average by 37%. Compared to other developed economies New Zealand outperformed almost all of them and was given the title of the “rock star” economy!

Signs for Mortgagee sales caused by the GFC were a fairly regular sight around some New Zealand cities. Some owners found it hard to pay higher interest rates but it was far less wide spread than in the USA. Today 10 years on interest rates are at record lows and have been steady for at least 2 years.

Official Cash Rate

The OCR which is a major factor in determining New Zealand mortgage rates is at an all time low of 1.75% and has remained unchanged since the 10th of November 2016. The next OCR review will be on the 8th of November which will be the last one for 2018.

With inflation below 2% per annum all the indications are for no change. The projections are in fact that there will be little or no change during 2019 to the OCR. As we know however a lot can happen between now and the end of 2019.

Meanwhile a lot needs to be done to overcome the housing shortage especially in Auckland where a shortfall of around 40,000 dwellings is believed to exist. The old saying—”safe as houses” still seems to hold true, lets get on and build more!