Housing market in full blossom

By ANNE GIBSON

Residential property is tipped as the stellar performer this year, with all signs pointing to a prosperous 12 months for investors and the country.

Six of 10 sharemarket analysts picked Fletcher Building as the investment most likely to do well this year because of an expected strong performance from the building industry, a positive reception to sales of non-core assets and respect for new chief executive Ralph Waters.

Christchurch-based real estate company Harcourts Group said last month that its property sales figures for November were the best in the company's 113-year history.

Mike Green, managing director of Harcourts International, said the 2940 property sales made by Harcourts in November resulted in $530 million of deals done, breaking the $498 million record of February 1996, although he agreed that part of the reason for the growth was Harcourts' expansion in the past year, particularly in the Auckland region.

Residential building consents issued in for Auckland in November were the highest monthly total for two years, figures from Statistics New Zealand showed this week.

The November figures confirmed our desire to build more houses. Councils gave resource consent for $298.4 million of building work in November and the increase in house construction is evident throughout the country. New dwelling approvals rose in nine of 16 regions.

The trend to build more houses became evident in January last year.

Not surprisingly, the banks have been quick to pick up on the trend, expecting to gain more mortgage business.

ASB Bank confirmed the upswing in the housing market cycle, its chief economist, Anthony Byett, saying last month that low interest rates were providing a cyclical push by investors and residents into houses.

He predicted that the average house price would increase by at least 4 per cent this year.

"The New Zealand housing market is once more vibrant," he said.

"Not only are interest rates low and house prices reasonable, but there has been a fundamental change to population growth.



"Now is a good time to buy a house, with interest rates providing a cyclical push and more people providing a fundamental impetus."

But the interest-rate stimulus could be short term and a double-edge sword, he warned.

"Interest rates have been pushed artificially low globally, as central banks endeavour to stimulate economic activity.

"When their job is done - typically around six months - then central banks will raise short-term interest rates again. For now, however, low interest rates are providing a boost to housing."

As for migration putting pressure on housing, Mr Byett noted the change in Government policy to allow more new migrants, as well as the fact that fewer New Zealanders were choosing to emigrate and more were returning home.

In the past six months, the net inflow had averaged 2000 people a month after seasonal adjustments.

"On a conservative estimate, the net inflow this year is likely to be in the order of 20,000 people," he predicted.

Statistics New Zealand figures confirmed his view.

In the year to November, permanent long-term arrivals exceeded departures by 4900, compared with a net outflow of 9600 migrants in the previous November year, it said.

This was the first net inflow in a November year since 1997. There was a net outflow to Australia (26,200), but significant net inflows from China (10,000), India (3900), South Africa (2800), Fiji (2100) and Japan (1900).

But Mr Byett also warned of a possible downside in the housing cycle.

Factors likely to constrain growth in the housing market were modest household income growth, low price expectations as a result of experience in recent years and greater housing supply.

"Along with the greater housing demand, new building will also increase to provide the matching supply," he said. "Nonetheless, new supply takes time. In the meanwhile, upward price pressure is likely."

The Real Estate Institute never misses a chance to announce good news and hurry along the fortunes of its members, so it was little surprise when last month institute president Rex Hadley announced that property sales for November were the highest in four years.

"The residential property market has not witnessed such a high level of activity in November since 1996," he said.

"The institute has always said that home ownership is a large part of the New Zealand culture and I think November's figures reflect that.

"I don't believe that many people prefer to rent. New Zealanders will enter the property market as soon as interest rates and property prices make purchasing possible."

The institute recorded 7881 sales in November, up considerably on the 5810 sales in November 2000. That pushed up the value of sales from $1.2 billion in November 2000 to $1.6 billion last November.

The median sale price was up $5000 in Auckland, from $240,000 in November 2000 to $245,000, on the North Shore from $267,750 to $272,500, in Waitakere City from $185,000 to $197,000, and in Manukau City from $234,000 to $246,000. But the median price in Papakura fell from $215,000 to $175,000.

Bayleys Real Estate noticed how well Auckland's luxury homes were doing in terms of number of sales and prices.

The volume of sales for the top 15 per cent of Auckland residential property - homes selling for more than $400,000 - was at record levels, the research department found. The 897 sales for the July quarter were a 33 per cent increase on the 676 sales in the previous three months.

The median price for an Auckland house in this range also showed a record of $560,000 for the three months to April.

"The total value of sales in the top 15 per cent increased to $551 million in the July quarter, the highest level recorded over the last four years," Bayleys said.

Statistics New Zealand

ASB Bank

Real Estate Institute of New Zealand

Bayleys