Building consents on the up

The median price for a home in Auckland is now $798,000 according to Barfoot & Thompson. Photo / NZHerald.

Strong construction activity continues to boost the regional economic outlook, especially in Auckland and Canterbury, say economists at Westpac. They report that building consent data for February, released on March 30, confirms Auckland is cranking up the production of housing, now up 23 per cent year-on-year.

This week's property podcast with Steve Hart:

The bank's weekly economic report says that after January's breather -- following three months of solid growth in the number of building consents for the SuperCity -- consents bounced again, and have totalled more than 9500 in the past 12 months.

However, the report's authors say there is still a long way to go to have consents meet demand.

"We have long forecast that Auckland needs to deliver around 11,000 dwellings a year over several years to eat into its housing shortfall, and strong net migration continues to widen this gap.

"Even in Canterbury, where consents fell particularly sharply last month, there was a rebound that was surprising in its scale, although we were already expecting some recovery."

Wellington is on the up. The economists say that after years of little growth in the capital, confidence is returning as concerns about government job cuts fade. With the highest salaries in the country, unemployment down, and house prices half those in Auckland, they say there is little reason to be pessimistic.

Population growth

BNZ economist Tony Alexander says demand for housing in Auckland is growing by about 15,000 a year, while actual supply is less than 8000.

Therefore, he says "prices rise".

He says: "The rest of the debate regarding Chinese buyers, interest rate changes and so on is just fluffery. Things will get a bit difficult when and if supply is rising over 10,000 a year and population growth has slowed."

He doesn't know when that will happen -- but it will one day.

There is also anecdotal evidence that some investors, preferring to avoid any risk of damage to their properties by tenants, are content to let their properties sit empty as the rise in value is more than the rental yield.

In essence, a small proportion of homes are being taken out of circulation -- compounding the housing shortage.

Bubbling up

Property prices in Auckland are starting to rise again, according to Peter Thompson, managing director of Barfoot & Thompson.

He says the average sale price obtained by the firm during March was $866,782, and the median price reached $798,000.

However, according to property valuation firm QV.co.nz while the Auckland market has increased 16.9 per cent year on year, it has decreased by 0.2 per cent over the past three months. It says the average value for a home nationwide is $559,492 and in the Auckland region it's $931,061.

Interest rates

There's still talk of two further interest rate cuts, with the official cash rate expected to end the year at 1.75 per cent. One can only hope the banks pass on the full cuts to its floating-rate mortgage payers.

Among the fixed-rate deals that caught my eye this week is ASB's 4.15 per cent for 18 months.