Sales are slow at Mt Maunganui, where apartments are continuing to cause grief. Photo / Supplied
Events in faraway lands hold the key to where house prices head from here. Bruce Morris looks at a subdued local market where Auckland continues to lead the way
As prices continue to edge upwards, certainly in much of Auckland, there's a danger of prodding the Kiwi real estate gene - faithfully handed down by father to son and mother to daughter - to bring the traditional reaction, "we better get in before it's too late".
With mortgage rates low and likely to stay that way for many months, and with banks weighed down by deposits and getting more charitable over who deserves a loan, the conditions would almost seem primed to lift sales and prices.
Overall prices are now close to where they were at the peak of the boom in late 2007, and comfortably above those levels in central Auckland suburbs especially.
After five years where house prices doubled and then four years getting us back to where we started in 2007, aren't we ready for a strong new spurt?
Outside the odd blogger with a portfolio searching for capital gain, few commentators with an interest in the residential housing market would believe that.
The Auckland weighting in the national data, helped a little by the unusual circumstances in Christchurch, is giving the statistical impression we're all back on our feet, basking from the glow of national prices that are now around 3 per cent below the 2007 peaks.
But take a look at the central pages in this issue of Property Report and zero in on the eighth column. There you will see whole slabs of the North Island which are still substantially below the market highs, some by as much as 15 to 20 per cent, and that's without taking inflation into account.
So doesn't that suggest they're good places to buy? More likely, it tells you there was too much irrational exuberance back in the boom. Perhaps those places are now at more sensible value, reflecting sliding populations, lack of employment opportunity, miserly demand and gun-shy investors hurt by the Government's tax changes.
Sales levels even in Auckland are barely half those of the boom years; in all those provincial towns and suburbs they are dreadful. When demand is so poor with low interest rates, what will higher mortgages do to prices in the future?
The fact is that the existing activity is being largely fuelled by cheap money - and hanging over the market are events beyond our shores which will not be solved in a week, a month or a year.
If Greece doesn't default, if Italy stays staunch, if America keeps on its tentative growth path, if China continues to expand... then we will see more confidence and growth within New Zealand, more house sales and perhaps a steady-as-she-goes lift in prices.
But, against a background of low net migration and high existing property prices relative to income, when will that be? Probably not any time soon.
And when the stars align, the Reserve Bank and its inflation targets will snuff out any smell of a fresh boom by shoving up interest rates.
In the meantime, our stuttering domestic economy and international uncertainty mean thousands of New Zealand families are obviously deciding to wait and see. While it may not be a bad time at all to buy a house - if a home to live in is what you want and you buy wisely - that general caution doesn't add up to a housing bubble.
As economist Rodney Dickens puts it: "Great returns are not achieved by buying unaffordable assets and housing market bubbles don't start from a platform of unaffordable prices.
"... I believe the unfolding increases in national and Auckland house prices will prove to be transitory rather than being the start of a sustained boom or bubble."
Added to the impact of low mortgage rates, a lack of houses for sale has been behind the steady lift in prices especially in Auckland over the last year or so. But an increase in listings bringing supply more in line with demand should see that rise level out and perhaps even drift back.
In Auckland the market is hardly uniform, with some suburbs doing better than others; some properties are drawing multiple offers or selling well above reserve at auction, while others sit unwanted or force owners to discount. Buyers are very fussy, but will pull out the cheque book and go after a home that really stands out.
Simon Damerell, co-principal of Ray White Ponsonby Real Estate, operates in one of the country's wealthiest real estate patches where, in Herne Bay, the QV E-Valuer average tops $1.7 million.
He looks back on an excellent last six months for his business and notes that people selling today are getting more money for their property, but generally not a lot more. He also notes a change in attitude among property-owners.
"Buyers are being discerning, and thank goodness for that," he says. "A good villa or bungalow or well-constructed apartment in a good location will sell well, but if the property is, say, in a dip, if it's monolithic or looks like it is monolithic - that sort of thing - well buyers are saying there needs to be a discount.
"In the old days of the boom, there was some rubbish on the market and because people could afford it they bought it. But not today. Everything's got to stack up." Damerell is anxious about events far beyond our shores.
There are so many factors outside Ponsonby and New Zealand, he says, that "I would hate to lay some big gamble on anything involving great risk.
"It is not the time for that... The message is to be prudent, to be aware of the risks - yes, to buy a home, but to tread warily and not to over-extend yourself, and not to leverage yourself and thinking that we are back on some sort of escalator."
QV valuer Glenda Whitehead says the Auckland market remains patchy, with buyers willing to keep looking until they find what they want because "things aren't running away".
"Having said that," she says, "a good property in a good position will sell well... but there's a lot of caution out there and that's no bad thing."
In Whangarei and Northland, and to some extent the Rodney fringes of the new Auckland city, demand is fairly insipid, having an inevitable impact on prices, according to QV figures. And it's little better south of the Bombays.
In the Waikato, QV's Richard Allen detects a very conservative attitude among buyers and sellers and, while there has been some increased activity, it comes from a very low base.
"Really, nothing has changed much in the last six to 12 months, with no discernible lift in sales or price," he says. "People are very conscious that we are not yet out of the woods.
"In the last two or three years, peoples' attitudes have changed big-time. A lot of sobering things have happened in the past few years... people got a bit carried away."
He notes reasonable activity in the "middle-to-upper" price range from people buying their second or third home in Hamilton, but no real lift in first-home buyer interest and little movement at the top of the market.
Out in the rural towns, especially in South Waikato and Huntly and Ngaruawahia, the market is dismal, though Cambridge is holding up.
In Tauranga, QV valuer Shayne Donovan-Grammer says the low interest rates have brought an increase in activity from a low base. But he hardly views it the start of a general recovery.
"It's still very tenuous... the market is quite vulnerable. We're all on tip toes, aren't we?" he says.
Most of the activity is under $350,000, and new homes on half sites in central locations are in demand for around $300,000 to $330,000. But there's a lot of caution at the upper end and little activity in the big new subdivisions.
It's very flat and lifeless across at Rotorua, and slow also over at Mt Maunganui where apartments are continuing to cause grief.
Donovan-Grammer says the whole of the Mount apartment market was built on speculation, not yield, and the expectation of capital gain, and prices are down 30 per cent and more from the peaks of the boom.
"There was no inherent demand," he says. "People were after a quick capital gain, and then the musical chairs stopped.
"Now, four or five years later, we still have apartment mortgagee sales and, anecdotally, there's a strong feeling that most apartment owners would sell if they could.
"The people who can afford to do so are holding on, waiting for the market to rebound. But for the apartments, that may be a forlorn hope because the demand and yield issues will not go away."
For a snapshot of the North Island main centres, QVs national house price index (based on sale prices against rating capital valuations) gives the clearest picture of the price change from the peak of 2007 to the end of January (with the movement over the last year in brackets):
The new merged Auckland city: up 1.9 per cent since peak (up 5.1 per cent in the last year)
The old Auckland City Council suburbs: up 4.4 per cent (up 7.2 per cent)
North Shore: down 0.9 per cent (up 4 per cent)
Waitakere: down 1.8 per cent (up 3.2 per cent)
Manukau: down 0.9 per cent (up 2.8 per cent)
Whangarei: down 17.5 per cent (up 0.3 per cent)
Hamilton: down 11 per cent (up 0.5 per cent)
Tauranga: down 10.9 per cent (up 1.1 per cent)
Rotorua: down 15.4 per cent (down 3.4 per cent)
Taupo: down 14.5 per cent (down 0.6 per cent)
Wellington City: down 5.1 per cent (up 0.3 per cent)
Even with today's very ordinary demand, the statistics tell a story. Buy within a circle 10km or 12km so from Queen St and you'll be best placed to avoid misfortune if those international stars fall out of alignment.
OPINION: The court discourages involving children in disputes, to protect their welfare.