Prices nationally are on the rise

First-home buyers and investors are removing homes from the property stock.

We have all heard plenty about Auckland's rising house prices. But fewer people realise that almost everywhere else in the country is now increasing in value.

So what is causing this nationwide response?

Our analysis has shown the influence of Auckland buyers on markets across the top half of the North Island. But it doesn't explain why values are increasing further south.

Economic theory suggests that lower interest rates will cause house prices to rise, as lower mortgage costs encourage more buyers.

Mortgage interest rates are at historically low levels and have been most of the time since the 2008 Global Financial Crisis.

According to stats released by the Reserve Bank, average two-year fixed and floating rates dropped to lows during 2012 and 2013 then rose slightly in 2014. Fixed rates started dropping in early 2015 and floating rates followed in mid-2015. Both are now at record lows.

The timing of the latest drop in floating rates more or less coincides with when values started to rise across most of the country.

But interest rates alone can't explain rising prices -- there are nearly always other factors.

Low interest rates lead to an increase in demand but for a significant increase in prices, supply has to be low. That's where listings start to look like a smoking gun.

Across most of the country the total number of properties for sale has dropped dramatically over the past year. In Waikato, Bay of Plenty, Wellington and Otago the total number of listings is only about half what it was this time last year. This lack of supply is leading to buyers paying more to avoid missing out.

There are two notable exceptions. Auckland listings were already low last year so remain tight. The Christchurch market overshot post-earthquake and now listings are strong and demand moderate. As a result, Christchurch is one of the few places not increasing in value.

One explanation for the low listings is the types of buyers increasing their activity lately - investors and first-home buyers. Obviously, when first-home buyers purchase they don't sell a property at the same time. Likewise investors who are adding to their portfolios.

New listings usually pick up from August onwards. It will be interesting to see if this year they pick up enough to rebalance the market. I doubt it.