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June 2019 REINZ House Sales: Picking up the run rate

Contributor:
Fuseworks Media
Fuseworks Media

June REINZ housing data provided perhaps the first sign of the pick-up in the housing market we’ve been expecting.

Nationwide house sales rose 3% mom, building on May’s 1.7% increase. Notably, Auckland sales jumped an outsized 13.6% mom. House prices continued to basically flat-line.

June’s flicker of life, particularly in the Auckland housing market, helps reaffirm our view of a modest pick-up in the housing market from here. There are various cross-winds at play, but we expect nationwide house price growth to slowly pick up to 5-6% by mid-2020.

Implications

Today’s data leaves us comfortable with our expectation for a mild pick-up in the nationwide housing market over coming months. Housing policies targeting investor demand, particularly the foreign buyer ban, are acting as a clear drag on parts of the market. As such, regional differences will remain a key theme. But the stimulus from rock-bottom mortgage rates and the Capital Gains Tax back-down are expected to see house price inflation slowly lift to 5-6% by mid-2020. Auckland will underperform - we expect flat prices from here.

Comment

Nationwide seasonally-adjusted house sales rose 3% in June, building on May’s 1.7% increase. The pace of annual decline thus eased from -5.5%yoy to -3.8%. Amongst the individual regions, the biggest story was the 13.6%mom bounce back in Auckland sales. While this is a big jump, it should be interpreted more as a partial normalisation given just how slow Auckland housing market activity has been of late. At 1,808, the number of seasonally adjusted sales over the month is still well below the 5-year average (2,150).

The nationwide median of days to sell - a useful barometer for the degree of tightness in the residential market - ticked up slightly to 40.9 days (seasonally-adjusted). Most regions experienced a small increase. The movement in Canterbury was most noteworthy, with days to sell rising a relatively large four days over the month to 45. The Wellington market remains the tightest across the main centres with days to sell at 35.

House prices continued to stabilise. Our seasonally-adjusted estimates show a 0.1% mom rise in nationwide prices in June. Annual house price inflation held steady at 1.7%. Auckland prices slipped 0.2% (s.a) over the month to be down 3.5% over the year. Should housing market activity continue to recover, we’d expect Auckland prices to bottom out in coming months. A sharp lift-off in Auckland prices remains a bridge too far though, given the various housing policies now in play. Elsewhere, the performance of the housing market remains about as mixed as the Aussie cricket team’s. Of note, Wellington’s prior head of steam continued to cool with annual price growth there easing from 7.4% to 6.5% over the month (down from 10.2% at the end of last year).

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