House prices dipped last month, says the Real Estate Institute, but the number of properties changing hands was up more than 10 per cent from the month before.
There were 6,777 sales in July, a six-year high for that month. The national median price fell $9,000 -2.3 per cent, compared to June to $385,000. It is now $15,000 below the record median set in March this year.
The National Stratified House Price Index - which accounts for the make-up of high or low priced properties sold - fell 0.5 per cent last month. The Auckland stratified index also fell - down 4.4 per cent from June.
Nationally, the index is 8.6 higher than the same month last year.
Real Estate Institute of New Zealand (REINZ) chief executive Helen O'Sullivan said it had been the most active winter the residential real estate market had seen for a while.
"Reports from agents around the country suggest that first home buyers are moving quickly to secure properties ahead of any move by the Reserve Bank to impose lending restrictions on buyers with lower deposits," she said.
July is usually one of the quietest months in the real estate calendar with new listings and sales at low levels.
"As far as buyers are concerned the normal winter slow down hasn't happened this year, with volumes up strongly on July last year despite school holidays occurring in the middle of month. The increase in new listings in the month contributed to buyer activity which coupled with the easing in prices suggests that the main constraint is very much one of supply. Stock levels across almost all regions are now particularly tight," said O'Sullivan.
Expectations that house prices will rise remain at very high levels last seen in 2003 at the outset of the mid-2000s boom, according to ASB Bank's quarterly survey of housing market sentiment.
A net 56 per cent of respondents expect house prices to rise as the 62 per cent expecting higher prices dwarfed the 6 per cent expecting a decline.
That is despite an increase in expectations that interest rates will rise, to a net 39 per cent of respondents from a net 30 per cent in the previous survey.
Most market economists expect the Reserve Bank to start raising the official cash rate in the March quarter next year, and financial market pricing implies an OCR three-quarters of a percentage point higher than it is now by this time next year.
Reserve Bank Governor Graeme Wheeler is expected to soon announce curbs on no or low-deposit mortgages through limits on the portion of high loan to value ratio that retail banks can offer.
ASB economist Jane Turner said the bounce back in sales over July followed an increase in new listings during the month. Sales volumes had been subdued over May and June as the market was constrained by lack of supply.
"Despite the increase in new listings, the market remains tight and overall inventory levels are still very low. A sustained increase in new listings will be required over the coming months to materially ease the supply and demand imbalance in the housing market. There has been an increase in housing construction demand in Canterbury and Auckland, with consent issuance rising. Over time an increase in housing construction should boost supply on the market," she said.
The lift in sales was reasonably broad-based across the country over the month (although was strongest in Auckland). This highlights the broad-based nature of the increase in housing demand over the past year. Low interest rates, improving consumer confidence and renewed interest in residential investment have been key contributors to this recovery in housing demand. More recently, the lift in net migration will add further to housing demand over the coming year.
Turner said that once seasonally adjusted, the stratified price index was up 0.5 per cent.
She said that over the coming year a continued improvement in labour market conditions and net migration would continue to underpin housing demand.
"A steady increase in construction of new housing, particularly in Auckland and Christchurch, is required to alleviate the supply and demand imbalance."
The Reserve Bank had become increasingly concerned about the risks strong house price gains present to inflation and financial stability, said Turner. "Strong growth in house prices can often boost consumer demand and confidence via a wealth affect, and this is seen as a potential upside to the current inflation outlook."
The Reserve Bank had "explicitly tied future policy tightening to the extent of inflation spill over from house prices and construction. We continue to expect the Reserve Bank will lift the OCR from March 2014," she said.
• 6,777 houses sold in July 2013, up almost 15 per cent on July 2012
• New median high price in Otago; Auckland and Canterbury/Westland fall.
• National Stratified House Price Index falls; Auckland House Price Index falls 4.4 per cent from June.
• 1,381 houses sold by auction, representing over 20 per cent of all sales in July.
• Market continues to experience a significant shortage of listings