Westpac tips house prices to rise 7 per cent next year

Westpac is predicting that house prices will increase by up to 7 per cent in 2020 and now ASB says the market is "springing back into life".

The Westpac prediction comes as the latest data from the Real Estate Institute shows prices picking up after a sluggish period.

In its Home Truths newsletter, Westpac said the cancellation of capital gains tax combined with tumbling mortgage rates would push prices higher.

The bank predicts the turnaround of the market will be most pronounced in Christchurch and Auckland, where markets have been weakest.

This comes as the Real Estate Institute's House Price Index, which measures the changing value of property, rose 3.6 per cent to a record high in the year to September.

Median house prices across New Zealand increased 7.3 per cent, to a record high of $597,000, over the year earlier.

Median house prices in Auckland rose 0.5 per cent to $848,000, and sales volumes were up nearly 3.6 per cent in the region over the year before.

The regions with the biggest increase in median prices included Manawatū-Whanganui, Southland, Taranaki and Hawke's Bay.

Those with the biggest price drops were West Coast, Northland and Nelson.

While the national volume of sales was flat, REINZ chief executive Bindi Norwell said it was the highest number of properties sold in a September month for three years.

"This suggests that we're starting to see the usual spring uplift and also that more confidence is starting to creep back into the market," she said.

Regions with the highest volume of sales growth included Tasman, Otago and West Coast.

Mike Jones, ASB senior economist, has also commented on the REINZ figures.

"NZ's housing market is springing into life. It's an important sign monetary stimulus still works. It's just that there are different sectoral impacts and lags to consider. We expect the housing market upturn to gather pace in coming months," Jones wrote.

ASB had long been calling a spring lift in the housing market, due to mortgage rate cuts that began in autumn providing a boost to activity and prices from around now, given the usual lags in play.

"We're now seeing clearer signs of this pick-up occurring. Importantly, Auckland activity has rebounded strongly from mid-year stagnation. Prices are starting to respond to the prior lift in activity. And new listings are rising from low levels, as sellers become encouraged. We expect the housing upswing to gather pace in coming months," Jones said.

OneRoof editor Owen Vaughan told the Herald that there have already been strong signs of increased activity across the market.

"We've been hearing from agents in Auckland since the start of spring and illustrate the strength of the turnaround in city's real estate market," Vaughan said.

"Open homes are packed, and we are seeing sale prices well above CV in many of premium suburbs that had been in a funk. Auctions clearance rates are also ticking upwards, which will give homeowners who had been unsure of the market the confidence to list their properties."

- with RNZ