Property report: Sales, values will keep rising

Despite rising values, especially in Auckland, the number of sales has been very low. Photo / NZME.

The property market fired back into life at the end of last year. You may be thinking that it was already overheated, so how could it have come back into life?

Well, despite rising values, especially in Auckland, the number of sales has been very low. Although we have been slowly recovering from the lows of the global financial crisis for the past few years, sales turnover has still been at its lowest since our records began in the early 1980s. That was until November and December, when sales activity surged. The number of sales in November was 9 per cent above the previous year, and December was 30 per cent above. It finally looked like sales activity was beginning to return to normal.

That strong momentum doesn't appear to have continued into January and February. January sales were only 1 per cent up on the previous January, and indications are that February sales may be similar to last year's.

Meanwhile, nationwide values continue to increase. Since 2012, this rise has largely been driven by Auckland and Canterbury. However, since the middle of last year, values in Christchurch have been rising only slightly, leaving Auckland to be almost the sole driver of strong nationwide value growth.

Auckland values really took off in the last three months of 2014 according to our house price index. The 5.1 per cent increase equates to more than 20 per cent when annualised. We have to go back to the beginning of the previous boom in 2003 to find a three-month period when values rose that quickly in Auckland.

What's so different about Auckland? The things fuelling the property market, such as low interest rates, strong net migration and consumer confidence are affecting the whole country. Are they affecting Auckland more? Possibly; migrants tend to end up in Auckland more than other parts of the country and consumer confidence and employment prospects are better in Auckland.

Jonno Ingerson, director of research at CoreLogic. Photo / Mark Mitchell

But it's the lack of supply that is most unusual about Auckland. That lack of supply takes two forms. One is an outright lack of houses for the number of people. The other is properties listed for sale.

The usual seasonal surge in new listings is now coming into the market but the total number for sale is not increasing.

That suggests sales activity is keeping pace with new listings, meaning that choice for buyers remains tight.

This lack of supply means one thing for prices in Auckland. They will keep increasing. They will keep doing so until supply increases, which is still several years off, or demand falters. Migration is predicted to gradually ease this year, but it is gradual. Interest rates don't appear to be on the way up. In the meantime the Reserve Bank is pondering ways to cool demand.

The price of houses in many parts of Auckland may also start to dampen demand.

In previous property cycles the rest of the country tends to catch up to Auckland.

This time I can't see that happening any time soon.

Not only is the supply problem largely confined to Auckland, but many other parts of the country aren't enjoying Auckland's growth as a truly international city.

I'm expecting values to continue rising in Auckland, but not as fast as the end of last year.

The other main centres will continue to increase gradually.

I'm also expecting sales activity to gradually pick up again throughout the year.

Jonno Ingerson is director of research at Corelogic.