21 Jan 2014

House prices evening out - economist

8:34 pm on 21 January 2014

Regional fluctuations in house prices appear to be evening out, an economist says.

Regional fluctuations in house prices evening out, economist says.

Regional fluctuations in house prices evening out, economist says. Photo: PHOTO NZ

The latest figures from the Real Estate Institute show its house price index rose 9.2 percent in December last year, compared with December 2012, with the national median price rising $2000 to $427,000.

Institute chief executive Helen O'Sullivan said Manawatu, Whanganui, Taranaki and Northland experienced unexpectedly sharp price increases.

However, she said the median price in Auckland fell by $20,000 between November and December, and further data was needed to determine if this trend was likely to continue.

Westpac chief economist Dominick Stephens said it was beyond reasonable doubt that the housing market was slowing.

"If you look at what house prices are doing on a like-for-like basis, they're rising at about 1 percent a quarter at the moment," Mr Stephens said.

"The differences between the markets are probably ameliorating now, so Auckland's house price inflation is probably slowing while the rest is picking up and now the markets appear to be a little more even than they were a year ago."

Mr Stephens expected house prices to keep rising this year, but at a slower pace.

Sales numbers fall

Nearly 5700 homes were sold in December - an 18 percent drop from November. Sales fell by just over 1 percent compared to a year ago but plummeted by more than 14 percent in the $400,000 or less category.

Ms O'Sullivan said the Reserve Bank restrictions on banks lending to people with small deposits could be responsible but it may not last.

"We suspect there's some impact here from the loan-to-value ratio restrictions. Logically, the people who are going to struggle the most to raise the 20 percent deposit will tend to be those who are buying in the lower price points," she said.

"I guess what we're watching for is to see whether or not it's a trend in terms of those buyers dropping out of the market or if it's really just a slowing in pace, so those buyers have gone back to the drawing board somewhat and are working their way through some more complicated processes but will be back in the market at a later stage."

The upside was that there was affordable housing in the $400,000 price range available in parts of Auckland. However, they were not central unless they were apartments, she said.