House prices defy predictions with huge leap in March

Despite rumours of its demise, the housing boom seems to be alive and well.

Talk the housing market is turning down was turned on its head by Real Estate Institute figures out today showing the national median price jumped $10,800 in March.

The 6 per cent monthly rise to a record $280,000 was one of the largest for any month since the institute started compiling figures 10 years ago.

Economists have been predicting the Reserve Bank's seven interest rate rises since the beginning of last year would dampen the housing market, but that has proved incorrect to date.

The national median price is up 16 per cent on a year earlier and six of the 11 regions surveyed had annual rises of over 20 per cent. Taranaki led the way with a 46.6 per cent rise.

Reinz president Howard Morley said expectations interest rate rises alone would depress the real estate market were simplistic.

"A lot of economists are saying high interest rates will start to bite, but there is still a shortage of listings out there," he told NZPA.

Asked if it was a bubble that will eventually burst, Mr Morley said: "People have been saying that for how many years."

He cited one article quoting an economist saying that with the benefit of hindsight, the market had peaked in August, 2004 when the national median price was $254,000.

Today's figures increase the probability the Reserve Bank will lift interest rates again on April 28 at its next review.

A switch to higher end residential property sales was behind the latest rise.

Mr Morley said that, if anything, Auckland and Wellington had been dragging the market back with Auckland up 16.25 per cent on March 2004 and Wellington recording a 10.72 per cent year-on-year increase.

Total property sales increased from 10,231 in February to 10,398 in March 2005. However the latest figures are lower than the March 2004 volume of 11,371.

National sales in the $400,001 to $600,000 category increased by more than 200 over February to 1698 in March, while sales of properties in the over $600,000 sector also increased by more than 200 from 710 in February to 913 in March.

Sales at $400,000 and under fell from 8057 in February to 7787 in March, well below the March 2004 figure of 9356.

Mr Morley said that trend indicated the lower end of the market was happy to sit on recent gains rather than trade up, with rising interest rates more likely to affect that end of the market.

"The upper end market seems to be getting stronger and, of course, is probably less affected by interest rates and more likely to finance acquisitions through fixed rate mortgages."

Northland prices rose from $219,000 in February to $240,000 in March, while Auckland rallied after a period of subdued activity with its median up from $355,000 to $372,000.

Waikato/Bay of Plenty/Gisborne produced a smaller increase from $245,000 in February to $248,000 while Hawkes Bay, after a sustained period of growth in 2004, eased slightly from $242,500 to $240,000.

Manawatu/Wanganui was also slightly down from $155,500 in February to $155,000, but Taranaki continued its remarkable run with an increase from $193,000 in February to reach $220,000 in March.

Wellington was up from $276,750 to $289,000 and Nelson/Marlborough rose from $275,000 to $287,000.

Canterbury/Westland continued its strong recent surge with an increase from $231,000 to $249,000 and Otago performed similarly, rising from $204,000 in February to $219,000 in March.

Southland prices increased from $141,000 in February to $147,000.

- NZPA