We are emerging from an unusual winter that saw a strong increase in activity rather than the usual seasonal downturn.

We also saw an increase in Aucklanders moving and investing elsewhere, especially in Tauranga, Waikato District, Hamilton and Whangarei.

We continued to see values increasing strongly in Auckland and, for the first time, we began to see values pick up in Tauranga and Hamilton. The rest of the main centres further south increased only slightly and most provincial and rural towns stayed flat.

So why the unusually strong winter?

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Almost certainly the changes announced in May by the Reserve Bank and the Government are having an influence.

Those rules are already partly in play unofficially, and others land in November. Auckland investors will need a 30 per cent deposit on new purchases, and properties that you don't live in but sell within two years will be up for a capital gains tax. Meanwhile the current LVR speed limit rules are going to be relaxed outside Auckland so that banks will be able to allocate 15 per cent of their new lending to low-deposit borrowers, up from the current 10 per cent.

In Auckland, the impending rule changes will cause some investors to buy before the new capital gains tax kicks in. It will also encourage them to look elsewhere in the country where the lending rules will not be as tough.

Auckland prices continue to rise, thanks to a combination of fundamental and speculative pressures.

The fundamental pressures include low interest rates, record net migration numbers and, perhaps most importantly, a shortage of properties.

The speculative elements include more investor activity even though rental yields are very low, a high proportion of Auckland properties being re-sold within three years by the whole range of owner types, and an unknown number of foreign buyers apparently happy to pay well over the odds.

Rising Auckland values are not surprisingly making some buyers consider the option of moving elsewhere. In the past year we have seen a strong increase in the number of Aucklanders moving to Tauranga and just over the southern border of Auckland City into Waikato District.

When they do so, these former Aucklanders are trading down by an average of over $200,000, and often much more. For those former Aucklanders who can work in, commute from, or retire to these areas the option is attractive. Meanwhile, for locals in those areas the relaxed lending rules will open the market up to them again after potentially being shut out for a couple of years.

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So what's the outlook? Spring has arrived, a time when the property market traditionally ramps up until December. Sales volumes increase, more properties are listed, and the banks run mortgage specials to attract and retain customers. Values will pick up across the rest of New Zealand on the back of increased activity, particularly in the top half of the North Island, driven in part by Auckland money.

I don't, however, expect the rule changes to have a dramatic effect on Auckland. Values will keep increasing, just not as fast, and will do so until demand drops and supply increases. This will take a year or two to play out, unless something dramatic happens in the form of a global economic downturn.

Interestingly, there seems to be an increasingly widespread view among economists that global economic conditions are worth worrying about.

We have already seen the impact of that on our dairy prices. Our consumer and business confidence are also dropping rapidly, and confidence is a strong factor in our property market.

So I would suggest you think carefully about the impact of a shock in the global economy before expecting prices to keep rising. Apparent Auckland housing shortage or not.


Jonno Ingerson is Director of Research, CoreLogic NZ Ltd.