• Prices dropped 7 per cent in Auckland from late last year to early this year
• Effects of tax and deposit changes from Government/Reserve Bank discounted
• Random price 'tumbles and spikes' are more the result of sales price variations
• Auckland job growth one of the major reasons for prices rising
An economist has forecast Auckland house prices to rise by more than 10 per cent annually, despite a 7 per cent fall over the past few months.
Dickens, a former banking economist who has also been a member of the Reserve Bank's Monetary Policy Committee, has released a detailed analysis of the market for his clients.
He says that prices rose 14 per cent last year and should continue this trajectory in the near-term. He discounts much of any effect on prices from new Government tax and Reserve Bank deposit changes.
"The Auckland market has gone from an extremely strong demand-supply balance to a balance that is still supportive of house prices increasing at somewhat above a 10 per cent annual rate in the near-term," said Dickens.
"Based on the median dwelling prices reported by REINZ, Auckland existing dwelling prices fell 7 per cent between September 2015 and January 2016 (ie after the tax changes aimed at especially foreign investors and property traders and the November increase in deposit requirements for Auckland investors)," he wrote.
It only requires a quick look at the past behaviour of the reported Auckland median price to realise that the fall between September and January is no different to past temporary tumbles that have been followed by spikes.
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But he then challenged reasons for that temporary price drop, discounting the new tax and deposit rules as the cause.
"It only requires a quick look at the past behaviour of the reported Auckland median price to realise that the fall between September and January is no different to past temporary tumbles that have been followed by spikes," he said."Spikes and tumbles in the reported Auckland median dwelling price reflect normal behaviour and will be the result of changes in the composition of sales between higher-priced and lower-priced properties."
REINZ and agents were well aware of that behaviour and Dickens said journalists and banking economists should be as well "but too often the latter two groups comment on random variation in reported median prices as if it reflects changes in actual prices."
Dickens also questioned other recent house price data that showed a big jump in March sales.
"The 17 per cent increase in the seasonally adjusted number of Auckland sales between February and March may seem impressive but when viewed on the context of the past spikes and tumbles in Auckland monthly sales, it may reflect no more than random variation," he said.
"Most importantly, the number of sales in Auckland has been bouncing around over the last several months after falling sharply following the policy changes, with sales in March still 21 per cent below the September level," said Dickens.