Average Auckland house prices keep rising and rising

Auckland house sales and prices continued to rise in May as the property market in the country's biggest city soaked up an increased number of new listings. 

Real estate agency Barfoot & Thompson says the number of house sales rose to 1225 in May from 1070 in April, and were up 11% from the same month a year earlier.

The average sale price rose 2.2% to a new record of $822,148 in the month, and was up 17% from May 2014. The median sale price was more muted, falling 0.5% to $750,000 in May, though was still 16.3% higher than a year earlier.

New listings climbed to 1740 in May from 1580 in April, and were almost a third higher than the same month a year earlier, though the sales activity meant the company's available properties for sale at the end of month were down at 3060, compared to 3151 a month earlier, and 3498 in May last year.

"Buyers are mindful prices are at an all-time high, but the combination of a sound economy, low mortgage rates and a housing shortage gives them confidence prices are not on the verge of retreating," managing director Peter Thompson says.  He says during the past decade there has only been one year, 2013, when the company offered such limited choice as it entered winter."

Auckland's property market has been a bugbear for the Reserve Bank. It has been trying to contend with strong, currency-sapping imported inflation and creating a case for lower interest rates, by limiting the regulator's ability to loosen monetary policy for fear of further inflaming housing demand in the country's biggest city.

To try and quell the market, governor Graeme Wheeler announced plans to impose restrictions from October on highly-leveraged residential property investment borrowing in the Auckland Council's regional boundaries. The bank expects the new rules will cut Auckland house sales by 8% in the first year, and reduce price growth by between 2-4% percent in the same timeframe.

The government also announced efforts to reduce some of the incentives for investment in residential property, imposing a two-year bright-line test for house buyers. The tax department will chase capital gains more ardently, and require foreign buyers to hold a New Zealand bank account and Inland Revenue Department number.

Barfoot & Thompson says the budget initiatives didn't affect activity in May, and if they are to have any influence, they would show up in the June figures.

(BusinessDesk)