17 Oct 2018

Demand sees Wellington housing prices surge

7:43 pm on 17 October 2018

House prices are continuing to rise in Wellington, with growth of almost 24 percent in 24 months.

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File photo. Photo: RNZ / Richard Tindiller

Trade Me Property's figures show the average asking price in Wellington back in September 2016 was around $479,000 but since then it has risen by over $100,000.

Its head, Nigel Jeffries says browsing figures reveal that more people are looking for a home outside of central Wellington as prices continue to rise.

"In fact if you drill down Masterton's had the biggest increase, it's had a 20 percent jump in the last year closely followed by Upper Hutt which is up 15.5 percent in the last year, so there have been some pretty significant jumps in areas in the Wellington region."

Megan Lee, a first-time home buyer had been in the market for four months, but said six of the seven tenders she had put in so far had failed to hit the mark of what was sought.

The one that was successful turned out to be a house with weather-tightness issues.

She said property websites often did not give a realistic guide to prices.

"Websites like homes.co.nz's upper limit is usually not even close to what the houses are going for. TradeMe Property Insights seem to be a little bit better, but usually if you've got a guide price, it's going 5 to 10 per cent above that."

Ms Lee believes it may make more sense to attend an auction than make a tender offer.

"Not everything that goes to auction sells at the top figure at auction; some people can put in an offer beforehand, but at least you know what other people are bidding.

"With a tender I could put in a bid $50,000 above what the next person did, but I won't know that."

A Lower Hutt real estate agent, John Ross from The Professionals said at present there were not enough houses coming on the market to meet demand.

He said auctions were attracting up to 10 bidders and a house in Naenae, which had been appraised at under $800,000 recently set a record auction price, selling for over $900,000.

However, Mr Ross said rents were also growing quickly and it was probably easier to find a house to purchase than it is to find a house to rent.

"There's been massive growth in rents in the past year and they're continuing to rise and that has probably been part of the whole calculation - tenants are saying "perhaps we're better to buy rather than rent".

There is more security of tenure with buying than renting. If you take a mortgage you know that is pretty well what's it's going to be, [whereas] if you're renting you know the rent is going to go up."

Westpac's chief economist, Dominic Stevens said there were several reasons for Wellington's buoyant house market, including a pre-existing under-valuation which needed correcting, and the change of government.

"Labour governments are more likely to hire more civil servants and the Wellington economy is one of the most confident economic regions in the country.

"People are geared up for a bit of a hiring boost in Wellington and that's another factor boosting prices.

"Also, Wellington's population growth has been quite rapid and outstripped construction by quite a margin, leaving a shortage of houses, which has also probably contributed."

However, Mr Stevens said forecast taxation changes, along with a foreign buyer ban and the possibility of a rise in mortgage rates, would eventually lead to a slow down in Wellington's house prices.

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