Guest Editor: Brad Olsen at Senior Economist, Infometrics
Increased housing supply overlaps with more modest house price gains
House prices continue to rise at a rapid pace across New Zealand, up 10.3%pa over the last year alone. With it now well established that New Zealand’s building levels over the last decade haven’t kept pace with population growth, there’s an increased focus from experts on lifting the supply of housing to start to address house price rises over time.
Much of the increase in demand for property over the last year has been fuelled by interest rates diving closer to 2.0%. But the responsiveness of property markets to this increase in housing FOMO (fear of missing out) has also been dictated by housing availability in local markets. Simply put, the more houses there are available for potential buyers, the less that prices are usually bid up.
Estimates by homes.co.nz and Infometrics show that the increase in supply in some areas coincides with more modest house price growth over time.
|New Housing Stock|
|Built after 2010||Built pre 2010||HomesEstimates, 1 year average % change|
The greater levels of construction in New Zealand haven’t been shared equally across all parts of the country, with only 4.2% of the total stock of Dunedin dwellings being built in the last ten years. This lower level of new builds occurring simultaneously as rampant population growth, has increased pressure on existing properties as more people bid up the price of the relatively fewer houses on offer. The low rate of new builds in Dunedin overlaps with 21.5%pa growth in average property prices over the last year.
At the other end of the spectrum, areas like Hamilton and Christchurch (the latter skewed by post-earthquake activity) have seen a boost in construction to house population inflows. More than 14% of all dwellings in Hamilton and Christchurch were built in the 2010s and, as a result, house price rises in these two areas have been lower than in the other major centres.
In Auckland, just under 10% of total dwellings were built in the last decade. The effects of the Auckland Unitary Plan, which has allowed for greater densification of the Super City, have only really started to boost construction activity towards the end of the decade. So prices in Auckland are still rising at a fast pace, up 10.7% on average over the last 12 months.
Although increased levels of new housing stock generally overlap with more modest house price growth, it’s clear that increased construction hasn’t completely arrested house price growth. There’s widespread consensus that more property development is still needed to address this long standing undersupply issue across many parts of the country. In tandem, reductions in demand are also needed, such as cooling higher-risk investor demand, if real and lasting changes to the property market are to be achieved.
Trends in our Main Cities
House price growth continues to accelerate across most centres this month according to the latest median HomesEstimate. The median HomesEstimate in Wellington is now $983k with growth speeding ahead to 22.8% p.a. At the current pace, Wellington prices are set to head above $1M in April, if not before.
Auckland (19.9%), Dunedin (19.7%), and Tauranga (19.5%) are all knocking on the door of 20% annual growth in house prices, with no real signs of slowing any time soon.
Although listings and sales numbers are rising, they still remain below previous peaks. And with such strong demand still for property, prices appear poised to rise even faster.
NZ’s First Home Buyer HomesEstimate
The “First Home Buyer HomesEstimate” is homes.co.nz’s estimate of what a typical first home may cost. It is calculated to be the lower quartile HomesEstimate in a town.
How do we calculate these figures?
The homes.co.nz Monthly Property Update is generated using homes.co.nz’s monthly HomesEstimates and provides an up-to-date perspective on house values around New Zealand. By valuing the entire housing stock, the homes.co.nz Monthly Property Update can compare median values from month to month in a consistent and reliable way. Our HomesEstimates are calculated for almost every home in New Zealand by an algorithm that identifies the relationships between sales prices and the features of a property.
Established in 2013, homes.co.nz is NZ’s first free property information portal eager to share free property information to New Zealanders.