New Zealand house prices have recovered strongly in the second half of 2019, growing 6 percent since June to see annual house price inflation run at 5.3 percent year-on-year. In December, house prices rose 1.2 percent, to be up 3.4 percent in the fourth quarter, with the rise widespread regionally. Sequentially, sales were up 0.7 percent. Days to sell tightened further to 35 days, with houses in all regions selling faster than average.
A rise in the housing market was anticipated on the back of weakness in the prior year, declines in mortgage rates, as the regions continued to play catch up to Auckland. The recent recovery in the market will underpin the economy after last year’s low ebb, and implies that monetary policy is doing its job. Nevertheless, it is significant to keep this in context, with house price inflation still below its long-run average of 6.8 percent year-on-year and close to where nominal GDP growth is running, noted ANZ in a research report.
Slightly more strength is expected in the near term, given recent continued tightening, However, several of headwinds, like housing affordability, are still relevant and at this stage, are likely to keep the market bounded in years ahead, said ANZ.
“That said, the housing market is tight and house price expectations have risen, so the possibility that the market gathers self-reinforcing momentum is a key risk that we are watching. We will be watching sales activity, new inventories, days to sell and house price expectations closely”, added ANZ.
