Property Report: Auckland slows, despite the headlines

Most headlines still talk of huge jumps in property values, and that may now be giving some people an over-inflated view of the value of their home. Photo / Doug Sherring

It's starting to look like the runaway train that is Auckland property prices has slowed to a crawl.

Trouble is, most of the headlines still talk of huge jumps in property values, and that may now be giving some people an over-inflated view of the value of their home.

It is easy to illustrate huge property price rises when comparing a house bought last year and sold this year.

Some people did very well during what was a frantic market last summer.

The train started to gather speed in spring 2014, and carried on into the New Year as foreign cash poured into the market and mortgage rates were cut.

Peter Thompson, managing director at Barfoot & Thompson, says prices across Auckland's real estate market have risen by just 0.6 per cent since May.

However, it is cold comfort as average Auckland house prices are now around eight times the average salary. These prices have forced plenty of people to look elsewhere for their first home, and Hamilton seems to have become a popular location for what's been termed "Auckland refugees".

Some people with a property to sell have headed north, cashing up and wiping away their mortgage.

As for those interest rates ... there is talk of them going down still further, particularly if economic growth and inflation remain at pitifully low (recessionary) levels. Current fixed mortgage rates are at historic lows.

And there is quite confident talk among some bank economists that our OCR will fall to just 2.5 per cent by year end (it is at 3 per cent). And that should bring down floating mortgage rates to a hair below 6 per cent -- if the banks play nice.

Meanwhile, although investors will face a capital gains tax on profits from property bought and sold within two years after October 1, it seems unlikely to change anything or help anyone. Inland Revenue reckons the new tax will raise just $5 million a year, and many in the industry do not believe it will curtail property speculation.

So while the Government's announcement may have caused the intended distraction during the height of the real estate frenzy, it was just a lot of hot air.

Housing Minister Nick Smith's plan for more housing will fall short of what's needed, and even the rampant construction of apartment blocks across the city will do little to dent demand from those looking for a roof over their head. So how will it pan out this summer? So long as there's low interest rates, high immigration, a calm global economy, and a shortage of housing in the best city in the world, expect the runaway real estate train to steam up once again.

Property Report headlines

• Speculators sit on land: Land bankers have become increasingly active around Auckland's fringe — many waiting to cash in on areas earmarked for future development.

• Apartment boom: Thousands of apartments are being built across Auckland — but many have already sold and supply is not expected to meet demand.

• Jonno Ingerson: Good idea to watch global economics: Comment by CoreLogic NZ's Director of Research.

• Aucklanders head to Hamilton: Hamilton and Huntly are areas drawing house hunters unable to buy in the big smoke.

• Andrea Rush: Buyers flee as prices jump 20%: Comment by QV National spokesperson.

• Auction tips and tricks: A seasoned auctioneer has some advice for first-timers.

• Industry leaders' opinion: What experts are saying on the market.

• Spotlight on Grey Lynn: With sections spacious for the inner-city, Grey Lynn values its inheritance while adding style.

• Spotlight on Mt Eden: Lovely, spacious old villas and a plethora sought-after schools are a huge drawcard for families.

• Spotlight on Long Bay: New development of about 2,000 houses is about a third complete.