House prices continued to climb in April

The national median selling price for houses rose 1.6 per cent in April to $349,000, according to the monthly figures published by the Real Estate Institute today.

Although house price inflation slowed from the 2.5 per cent rise in March, the annual rise lifted to 14.6 per cent from 13.7 per cent.

Auckland was largely behind the April increase, with its median price rising $9000, or 2 per cent, to $452,000.

Nine regions experienced increases in prices, with just two regions -- Otago and Waikato/Bay of Plenty -- falling in price and one remaining unchanged.

The Auckland metropolitan median rose $10,000 to $459,000.

However, there was a drop in sales from 3446 in March to 2559 in April, possibly due to the timing of Easter.

National sales were down from 10,989 in March to 8194 in April because of the short working month, but sales were well up on the 7576 of April 2006.

Auckland region days to sell were unchanged from March at 27, considerably less than the April 2006 figure of 33 days to sell, while national days to sell fell to 28 compared with 34 in April 2006.

Institute president Murray Cleland said the increased prices were a "not unexpected" response to recent attempts to tighten monetary conditions and take the steam out of the market by the Reserve Bank.

"The market seems to have shrugged off the recent Official Cash Rate increase and consequent mortgage interest rate rises, suggesting that the real issue is one of demand -- too many people trying to buy too few houses with the result that prices are being pushed up."

He said that the rapid escalation in prices this year added to the Government's housing affordability headache. He called for measures in tomorrow's budget to alleviate the shortage, particularly for first time buyers.

"Migration is a major factor in the housing shortage and the rising prices which are pushing home ownership out of reach of many people."

Around the regions, Northland managed a $14,000 increase to $320,000.

Waikato/Bay of Plenty prices fell from $320,000 in March to $312,500, while Hawke's Bay surged ahead by $12,000 to $280,000.

Manawatu/Wanganui was unchanged at $230,000 while Taranaki came up with the single biggest regional rise up $14,500 to $275,000.

Wellington was up from $375,000 in March to $377,900 and Nelson Marlborough was up from $326,500 to $330,300.

Canterbury/Westland rose from $300,000 to $310,000 and Central Otago Lakes was up from $416,000 to $430,000.

Otago prices eased from $230,000 to $227,000, while Southland prices rose from $157,000 to $164,500, taking the lead in the annual price growth table with a 28.76 per cent rise from April 2006.

ANZ economists said there was a growing risk of a further rate rise as strong house price growth risked providing a boost to consumer spending via the wealth effect channel.

"The relationship between house price growth and consumption growth is well known," they said.

Retail spending in the March quarter was much stronger than anyone had anticipated and a strong labour market was providing base support.

"But the wealth effect from higher house prices has the potential to sustain the rebound in consumer spending well into the middle of this year and early in the second half of this year."

ANZ said the Reserve Bank could not afford to let momentum within the economy continue given the prevalence of inflation pressures.

Some indicators such as consumer confidence pointed to a softening in activity but they said the Reserve Bank could not let a rebound occur.

"The Reserve Bank needs to make certain of reining the current momentum in the economy this time around.

"This means the bias will be to do more than is necessary on the rates front to engineer this, and sooner rather than later. We believe the risk profile for a rate hike in June is increasing."


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