The halo effect takes over

Are Auckland empty-nesters and property investors heading south?

House hunters who are unable, or unwilling, to pay sky-high prices for Auckland real estate are driving property prices up in the regions, according to the Real Estate Institute.

Colleen Milne, the organisation's CEO, is calling it the halo effect as some first-time buyers and investors snap up property in the Bay of Plenty and Waikato. Otago is also seeing price rises, which could be down to empty nesters leaving the Super City and investors spreading their bets.

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Stats released by Milne this week reveal that September saw New Zealand's median price jump to a record $484,650, a 15 per cent increase on the same time last year, and more than 4 per cent up on August.

Take Auckland out of the equation and the national median price went up by more than 8 per cent in the 12 months to September to $365,000. During the same period, Auckland's median price rose $156,000 -- or 25 per cent -- to $771,000.

Milne says: "There is continued evidence of Auckland investors and first-home buyers spreading to other regions causing a halo effect, most notably in Northland and Waikato/Bay of Plenty."

In September 8174 properties and sections changed hands with a combined value of more than $5 billion -- almost 40 per cent more properties than the same time last year.

However, the market has softened slightly, so the next set of property stats might show a different trend altogether.

Market sentiment

BNZ's October business confidence survey includes a mixed bag of comments about the real estate industry.

One respondent says house prices are not yet falling, but cautions estate agents not to over-inflate price expectation when trying to get business from vendors.

One respondent says: "Overall the mood [from buyers] is still positive, but a little less extreme and more balanced with purchasers making judgments based on good information and common sense."

Another says there is still some upward pressure on prices, as well as the first signs of fewer people deciding to sell by auction.

Interest rates

Reserve Bank Governor Graeme Wheeler hinted at futher cuts to the official cash rate this week, meaning it will likely drop from 2.75 per cent to 2.5 per cent on October 29.

The cut, if it goes ahead, will come just in time to give the housing market a little boost in the run up to Christmas, and likely lead to even lower fixed rate mortgage deals.

Among those on offer is the ANZ's one-year rate of 4.35 per cent, there's 4.49 per cent for 18 months from the ASB, and the BNZ is offering a two-year rate of 4.39 per cent.

Australia

Many Australian cities have experienced the same property booms as Auckland. However, analysts at Macquarie are forecasting a 7.5 per cent drop in house prices across Australia starting in March next year. They expect prices to start recovering in June 2017.

Wes Campbell of JCP Investment Partners says while housing activity has kept Australia afloat after its mining boom fizzled out, the sector seems to have peaked.