Steady house prices produce mixed messages

Photo / Herald on Sunday

House prices stayed static in the last two months and fears of more expensive mortgage money could be to blame.

Real Estate Institute figures for November showed the national median remained at $355,000 in October and November.

So the institute instead deflected attention away from that and highlighted a doubling in median house prices in the past decade, from November 2000's $174,000 to last month's $355,000. Economists are divided on housing's direction with one particularly gloomy but others more positive.

Shamubeel Eaqub, New Zealand Institute of Economic Research principal economist, said rising mortgage rates were biting.

"The housing market is beginning to slow from past increases in mortgage rates. There is more to go. Affordability is worsening but tight supply and rising net migration remain supportive for now. Next year, the trio will be working against housing. We expect renewed weakness in the housing market."

Darren Gibbs, of Deutsche Bank Fixed Income Research, was more positive. As the broader economy recovers, the labour market stabilises and confidence consolidates, he expects the recovery in housing turnover to resume, especially if net migrant inflows continue at recent levels.

He highlighted Auckland house prices rising 11.9 per cent annually, and said prices were up 4.7 per cent in Wellington and 5.7 per cent in Christchurch.

Robin Clements, UBS senior economist, said national house prices were 2.9 per cent below their November 2007 peak.

"The REINZ report, on the face of it, was soft with prices almost flat and sales falling. However, house price momentum for the last three months was still strong. It is premature to conclude that sales have turned downwards," said Clements.

Peter McDonald, the institute's president, said median prices were up in nine out of 12 areas last month.