House prices advance in January, sales activity slows

New Zealand's median house price rose 9.4% in January, with two regions recording new records, although activity slowed, according to the Real Estate Institute.

The national median house price increased to $490,000 in January from $448,000 a year earlier, the institute said. The price declined 5% from the December median level of $516,000, which the institute said was in line with typical patterns for quieter holiday trading. There were 4307 sales in January, lower than the 6533 sales in December and 5048 in January last year.

Record migration and low interest rates have bolstered the country's housing market, prompting the central bank to tighten up lending rules to reduce the risk to the nation's financial stability. New restrictions on lending to property investors with high loan-to-value ratios came into play in October last year, taking some of the heat out of the market.

In Auckland, the country's largest city, rising house prices have made buying property unaffordable for many. In January, the median Auckland house price increased 12% to $805,000 from a year earlier, although it was 5% weaker than December. After months of record low numbers of houses available for sale across Auckland, the number of properties available jumped 17% to 1135 from the year earlier, and sales volumes fell 18% to 1247.

"Sales activity was weak across many regions in New Zealand, with Auckland sales activity particularly soft," ASB economist Kim Mundy said. "Soft demand, associated with the investor-focused loan-to-value ratio restrictions (LVRs) is slowing sales and also weighing on house price growth. We expect to see activity remain subdued over 2017, especially in Auckland where prices are most stretched."

The number of homes sold for more than $1 million in January rose 8% to 456 from a year earlier to make up 11% of all sales. Those sold for less than $400,000 dropped 26% to 1611 to make up 37% of all sales.

Nelson/Marlborough recorded the biggest annual gain, with the median price up 25% to a record $470,000, and Hawke's Bay also hit a new record, up 16% to $366,000. Big gains were also felt in Waikato/Bay of Plenty which jumped 22% to $462,000, while Manawatu/Wanganui increased 21% to $265,000.

Elsewhere, Northland's median price increased 18% to $399,500, Taranaki advanced 4.8% to $351,000, Wellington gained 17% to $460,000, Central Otago Lakes jumped 20% to $630,000, Otago advanced 8.6% to $304,000 and Southland increased 17% to $217,000.

Canterbury/Westland bucked the trend, with the median price slipping 1.6% to $418,000.

(BusinessDesk)