"For most properties, prices are edging up, and the average sales price in June was 3.2 per cent above the average price in March, which is a modest increase over the three months given the tight supply of properties.
"Buyers are measured as to what they are prepared to pay, even though mortgage rates are low and the banks' mortgage lending criteria are competitive."
Goldman Sachs NZ economist Philip Borkin said that while volatile, activity in the Auckland housing market "continued to trend higher supported by the interest rate backdrop".
A tight inventory situation was also boosting prices, although he suspected they would "eventually be capped by structural forces."
The average sale price rose by $7,000 to $589,000 in June.
"While we do not place much weight on this price measure given that it is susceptible to the composition of houses sold, it is the highest average selling price on record and is up 13 per cent year-on-year," said Borkin.
"On a seasonally adjusted basis, sales activity in the Auckland property market has been volatile over the past few months. However, we still see it trending higher overall. On a three-month average basis, the level of sales is at its strongest level since mid-2007."
The increase in sales activity was possibly a response to recent fixed mortgage rate reductions and also the reported increased competition among major banks, said Borkin.
The Auckland market continued "to be plagued by a tight inventory situation," he said. "At the current pace of sales, we estimate there is just 4.6 months' worth of supply on the market. We have little doubt that this is supporting house prices at present."
Borkin said the Auckland housing market was also benefiting from "some idiosyncratic factors over and above other regions".
"It is the only region still experiencing positive net international migration, and we suspect has also seen a population boost as some Canterbury residents relocate around the country. Given a lack of new home building over recent times, demographic pressures will also be supporting the market overall."
It was unlikely that mortgage rates would fall further without a "sharp narrowing in bank funding costs", said Borkin, but it was likely to see the Auckland (and nationwide) housing market "grinding higher."
"However, we see the upside (at least for prices) as being capped by 1 - an eventual increase in new listings as recent price gains support confidence from vendors; and 2 - structural issues around housing affordability and appetite towards household debt levels persist."
Barfoot's Wendy Alexander said new listings in June at 1,245 were "solid" and in line with expectations for the middle months of the year but were insufficient to satisfy significant buyer demand.
"The number of homes being listed in recent months is in line with normal trading patterns over the past few years.
What had changed was an increase in the number of buyers, and they were creating a demand that was not there 12 to 18 months ago. This increase was coming from a combination of people moving from renting to buying and growth in Auckland's population.
- HERALD ONLINE
