Lower mortgage rates drive up NZ median house prices 5.4% for year to May: REINZ

Cheaper mortgage rates across the Tasman have helped New Zealand house prices recover over the past 12 months to levels last seen around the time of the GFC.

The benchmark Real Estate Institute of New Zealand (REINZ) Housing Price Index rose 1.7% in May to be 6.4% up on the same time last year – 0.3% higher than the previous peak recorded in November 2007.

During this period house prices have increased by 5.4% to a median of NZ$369,000 (A$287,000).

In Australia, house prices were down 4.74% across the five major capital cities, according to RP Data- Rismark.

Mortgage rates are noticeably cheaper across the ditch, with the Reserve Bank of New Zealand offering a cash lending rate of just 2.5%, unchanged since March 2011 – 100 basis points lower than the RBA’s June cash rate of 3.5%.

Westpac New Zealand is offering a standard variable rate of 6.24%, compared with the 6.89% it is offering in Australia, according to www.interest.co.nz.

ANZ offers a “simple” variable mortgage of 5.74%, compared with the 6.8% standard variable rate it is offering in Australia.

ASB, the Commonwealth Bank’s New Zealand brand, has a standard variable rate of 5.75%, compared to the 6.8% offered in Australia.

According to the REINZ there were 7,175 sales in May, a 24.4% rise on the same month last year.

Jane Turner, economist at ASB, says the low interest rates are “stoking demand” and helping drive a trend of “gradual improvement” in the housing market.

The total value of residential sales was NZ$3.30 billion in May, compared with NZ$2.57 billion in April and NZ$2.46 billion in May 2011.

The Auckland market, New Zealand’s biggest housing market, has performed particularly well of late, with house price index up 3.7% from a July 2007 high in May 2012.

Auckland recorded 2,792 sales over May, a 28% rise on the same time last year, with the median sale price rising 7.8% over this time to a record NZ$500,000 (A$389,000).

Auckland’s largest real estate agency, Barfoot and Thompson, posted its busiest May in seven years, recording 1,165 sales during the month – up 31% from May 2011 – with sales prices rising 2.5% over the month to $582,285.

Managing director Peter Thompson attributes the jump in sales to significant number of new listings, “keenly priced mortgage lending rates, fine weather and a larger pool of potential buyers”.

Barfoot and Thompson listed 1,421 properties during May, up 12.2% from April.

REINZ chief executive Helen O'Sullivan says sales volumes have been surprisingly strong in May, with all regions recording increases in sales over April and over May last year.

O’Sullivan says May is typically stronger than April but the May 2012 increase was “considerably stronger than normal seasonal trends would suggest”.