House prices bounce back to record high

House prices have recovered across much of the country after dipping during last year.

Real Estate Institute figures show house prices surprised pessimistic predictions with last month's national median sale price at a record $260,000.

That is a rise of $82,000 or 46 per cent since December 2001.

The national median sales price rose 13.53 per cent over the past 12 months.

Industry analysts say the market was probably reignited when homebuyers took advantage of the mortgage war between the banks over two-year fixed interest rates.

Now that interest rates are climbing back, the question is whether the buying revival will fall away.

Figures released yesterday showed a resilient market in the face of the usual downturn before the holidays, said Real Estate Institute president Howard Morley.

"The data suggests we may be entering a period of consolidation with no erosion in the national median price," he said.

But the house price-watchers are looking for a guide from the figure for national houses sales.

The December tally of 8377 was down - from 9502 in November 2004 and 8703 in December 2003.

Fewer homes sold in the Auckland region - the country's biggest market - and the median price eased in a month by $2000 to $350,000.

Auckland City's lower prices and sales volumes were blamed for dragging the Auckland region down.

This was not a trend, said Mr Morley, but the result of fewer larger and higher-priced homes being sold.

He said median prices increased for homes in other Auckland cities, though sales were down, and the median also improved for Hamilton, Tauranga, Rotorua, Taupo and Gisborne.

The Nelson/Marlborough region - the star performer for the New Zealand market for two years - was the only region not to show healthy rises in the past 12 months.

Nelson Mayor Paul Matheson said he was not surprised by the drop.

"The indicators have been there for a while. I believe Nelson has reached its peak and is now starting to stabilise."

Houses that used to sell within a week were now taking at least a month to sell.

"I think Nelson might have found its level. Eighteen months ago the market really took off. I think it came from a very artificial base to start with and now it has found its real value."

Mr Matheson did not believe the bubble was about to burst and said the drop in price levels was good for the future.

"It just now becomes a little more attractive for people wanting to come here and I'm not talking about those with a lot of money, I'm talking about those who are middle-income plus who can now afford to live here."

The previous December was an exceptional month for sales of expensive Nelson properties, said institute Nelson branch chairman Darryl Marshall.

A different part of the market - in houses $250,000 to $400,000 - was showing stronger activity and this would pull the median price down.

Westpac chief economist Brendan O'Donovan said the national figures showed a dramatic turn-around in the market, which had been over-valued and slowly correcting.

The institute's December to December figures for Nelson were unreliable as a guide for what could happen elsewhere because they were skewed by December 2003 being such a big month for sales of higher-priced properties.

Last month was a spectacular one for sales nationally which, seasonally adjusted, were up 11.8 per cent, on top of an 8.6 per cent rise in November.

"But it could unwind later in the month and next month because those fixed rates have bounced back up 0.9 of a percentage point."