new zealand house price rises accelerating
News Posted On: 11 January 2010
New Zealand's government agency Quotable Value (QV) reported on Monday that average house prices had risen for the third month in a row as consumer confidence and the economy improved. The average price rose to NZ$404,671 in December, up from NZ$393,373 the previous month.
A straight three month rise is no big deal these days. The UK for example has been steadily increasing for a full six months. However the most striking aspect of the December rise in New Zealand house prices was the rate of acceleration. In October 2009 prices edged up by only 0.2%. Then in November the rise was 1.0%. Now in the last month of 2009 QV's residential house price index has shot up by 2.8 %.
Regionally some results were even better. Auckland posted the biggest rise in December – 5.1% after 3.1% in November. Wellington, was up 4.6% from 2.9% last month.
I am not sure if QV's valuation manager Glenda Whitehead has taken full account of this accelerating trend judging by the statement below.
"A cautionary tone still prevails in the market," she said, adding "Given the wider economic conditions we expect values to increase slightly throughout 2010, but not at the same rate as we have seen in recent months."
With prices less that 5 percent below the all-time high of 2007 there has to be a strong chance that a new high for New Zealand home prices could be posted in 2010, perhaps by spring.
It is true that activity has been down on normal, with volumes comparable with the last slow period around the turn of the millennium, but importantly this is because prospective sellers are unwilling to sell at present prices. What does that tell you about inflation expectations?
When prices were less than 5% higher than now real estate was a major inflationary concern for the Reserve Bank of New Zealand (RBNZ). Of course the global crisis took the heat off housing as deflationary concerns took over. Then, a fter five quarters including all of 2008 the economy finally emerged from recession in Q2 2009.
Now the central bank has hinted it will start raising rates again - but only from the middle of this year as the economy improves. This suggests it is less concerned with curbing house price inflation this time around.
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