New Zealand property values held their annual pace of growth last month, as demand outstripped supply in Auckland and Christchurch, according to state valuer Quotable Value.
National property values increased 7.1 per cent in the 12 months ended May 31, matching the annual pace for April, the agency said in a statement. Property values increased 1.7 per cent in the three months ended May, up from a 1.3 per cent quarterly pace in April, it said.
"Values are increasing fastest in Auckland and to a lesser extent Christchurch, with both cities driven by a lack of supply," said QV research director Jonno Ingerson. "Values are likely to continue to increase in the coming months."
The Reserve Bank plans to use new macro-prudential tools to restrict the volume of low equity mortgages as pressure in the housing market poses a risk to financial stability. Most economists expect the central bank will also raise the benchmark interest rate from a record low 2.5 per cent next year in part to contain the housing market in Auckland, where a supply shortage has driven up prices, and Christchurch, embarked on a massive rebuild after the earthquakes.
"It is becoming increasingly appropriate for the Reserve Bank to lift interest rates from very low levels in order to keep demand in check," ASB senior economist Jane Turner said in a statement. "While blocking access to credit might choke off demand in some instances, it is unlikely to have much impact on demand for prospective buyers in strong capital positions, particularly while interest rates remain at very low levels."
