KEY POINTS:
The housing market raced away again in February, after stuttering a month earlier, bringing little cheer to a Reserve Bank struggling to control inflation.
Real Estate Institute of New Zealand (REINZ) figures published today put the national median at a new high of $335,000 last month, having earlier eased from $330,000 in December to $327,000 in January.
But any worries that the housing market may be overheated were countered by Westpac bank which, also today, discounted the possibility the country was in the midst of a housing bubble.
Taking increased tax rates and lower long term interest rates into account, current house prices were justified by fundamentals, Westpac said.
In comments accompanying the February house price data, REINZ national vice-president Mike Elford said the strength of the housing market last month was clearly not the news the Reserve Bank wanted to hear.
"But it's great for homeowners in terms of growing the equity in their primary savings vehicle which is their own home," Mr Elford said.
"The Reserve Bank has a job to do but unfortunately it's based on a relatively narrow mandate, which doesn't give responsibility for economic growth or encouraging savings and first home ownership.
"So threats of further action to stem our country's enthusiasm for residential property investment will, we suspect, remain predominantly ineffectual."
He doubted last week's decision by the Reserve Bank to raise official interest rates would have much effect on the market.
The number of sales had surged from 7566 in January to 9357 in February, while the average number of days to make a sale dropped from 38 to 32 and in Wellington was just 22.
In Auckland, the median price rose $15,000 to $430,000, taking the increase for the year in the country's largest market to 11.7 per cent.
Wellington had a month-on-month increase of $18,600 taking the median to $370,500, giving it the country's second-largest annual increase of 21.5 per cent.
Topping the growth rate for the year was Southland, with a rise of 32 per cent following a $9000 monthly rise, taking the region's median to $165,000.
Canterbury/Westland had a $7000 rise for the month to $297,000 and an annual rise of 11.2 per cent.
The median price fell in two regions between January and February.
In Hawke's Bay, the monthly drop of $8000 took the median to $272,000, 6.7 per cent ahead for the year.
A $7500 monthly drop in Taranaki to a median of $265,000, left the annual rise at 6.4 per cent.
Central Otago Lakes was the only region where prices were lower than a year ago, down just under 1 per cent at $440,750 despite rising $8500 between January and February.
In Northland, the median rose $5000 for the month to $310,000, for a 12.7 per cent annual increase; Waikato/BOP was up about $2100 to $310,000, 10.7 per cent for the year; Manawatu/Wanganui up $6500 to $221,500 for 16.6 per cent; Nelson/Marlborough up $3000 to $310,000 for 6.9 per cent; and Otago up $8250 to $230,000 for 9.5 per cent.
Meanwhile, Westpac said that while house prices had doubled in the past five years they were not materially overvalued.
An increase in the top tax rate to 39c had increased the attractiveness of property for investors, pushing up prices by about 17 per cent, the bank said.
At the same time the fall in long-term interest rates had meant people could bid more for property to the tune of about 20 per cent.
Valuing property based on its worth to an investor, Westpac said it estimated the investor value of property to have been $168,000 in 1999 when the actual median selling price was $160,000.
As at last December, the investor value was $326,000 and the median price $322,000.
The adjustment period to higher taxes and lower interest rates was now over, Westpac said.
If the fundamentals changed, the investor value of housing would change, with the main risks being a fall in the top tax rate, or an increase in long-term interest rates.
- NZPA
