It hasn’t happened overnight, but it has happened. For some months now there have been strong hints that a stronger than expected housing market recovery might be on the cards. The question was not just if, but - if so - when.

Those questions no longer remain. It seems the market has emerged from its slumber, soaring back to life to end 2019 on a high. The latest data reveals the spring momentum has carried through into summer’s market, with a noticeable increase in activity.

Alongside the data, there’s a general change in atmosphere supported by anecdotal evidence and noticeably improved optimism among market participants. Most commentators are also presenting upbeat assessments, although there’s less unity when it comes to the specifics. The upshot? 2020’s market outlook is bright.

Strong Rise In Sales

Perhaps the most telling set of new data was the reporting on December’s sales activity. It shows a definite pick up in sales as 2019 came to a close.

According to REINZ, the number of properties sold nationwide increased by 12.3% to 6,285 in December 2019, as compared to the 5,596 sold in December 2018. That’s the highest volume for a December in three years – and the rise was driven by Auckland, which saw sales up by 31.7% year-on-year to 1,860 in December 2019. REINZ chief executive Bindi Norwell says this national increase equates to an additional 22 houses sold each day around the country in December, which is not an insignificant number.

Looking around the country, 12 out of 16 regions saw annual increases in the number of properties sold, she says. There were particularly strong increases in not just Auckland, but the Bay of Plenty (up by 21.5%), Southland (up by 18.3%), Northland (up by 17.3%) and Canterbury (up by 16.1%). But sales in Auckland were the highest for the month of December in four years.

“With insufficient properties on the market [nationwide] to satisfy buyer demand, it suggests that buyers are being more definitive when it comes to purchasing as they are aware of the need to move quickly on properties in areas with high demand.”

Norwell adds that this is backed up by a decrease in the median number of days to sell which is now at its lowest point for three years.

While there has been an improvement in sales in markets around the country, it is the turnaround in Auckland’s sales activity which is most significant. And the REINZ data is not alone in recording it. Barfoot & Thompson’s December sales numbers were their highest in four years, which has left the agency’s managing director, Peter Thompson, predicting that Auckland’s market is set for an active late summer and autumn selling season.

“The market is the most buoyant it has been at this time of the year for three to four years. We sold 777 properties in December, in excess of 50% more than we sold in the same month last year. You would have to go back to 2014 for December sales numbers to be significantly higher.”

But this strong December performance has left the market extremely short of stock, he cautions. “At month end we had only 3191 properties on our books, the lowest number in any month for more than four years. Properties for sale were 13.8% lower than in the previous month and limited stock is holding back sales activity.”

There’s A Price Revival Going On

Not so long ago, it looked like prices were stalling and growth would remain muted going forward. That too has now changed, with data from sources across the board showing robust price growth – even in long dormant Auckland.

The latest instalment of the QV House Price Index has all 16 of the major cities they monitor showing quarterly value growth in December. It’s the first time that has occurred since November 2018.

Further, it makes it clear the pace of price growth is picking up nationwide. According to QV’s data, the average national value was $710,129 in December. This was up by 2.7% over the past three months and by 4.0% year-on-year. That annual growth rate is sharply up from 2.0% in June 2019.

In a similar vein, the rate of value growth in the Auckland Region has picked up noticeably. In December, the region’s average value was $1,047,110, which was an increase of 1.9% over the last quarter, as compared to 1.3% in the three months to November. It was still down slightly year-on-year but by 0.1% as compared to -1.2% in November.

QV general manager David Nagel says the regions continued to thrive throughout 2019 while the markets of the main centres lost steam. “But even the main centres have shown renewed strength in the past two months. The Auckland area has for the second consecutive month experienced quarterly value growth in all the legacy council districts.”

The Dunedin market remains the star performer of the main centres. It saw its values rise by 18.3% in the year to December 2019 and by 8.7% in the past three months. This left the city’s average property value at $514,645.

Of the smaller centres, QV has Invercargill (up 6.4% over the quarter and 16.8% year on-year to $334,353), Hastings (up 5.4% in the past three months and up 13.0% year-on-year to $563,890), and Rotorua (up 5.0% over the quarter and up 13.1% year-on-year to $499,702) all turning in strong results.

The REINZ data also shows median house prices increasing in most markets around the country, with the West Coast the only region not to a see a rise in prices in December. It has the national median price up by 12.3% in December to $629,000 from $560,000 in December 2018 and five regions turning in new record median prices.

Those regions were Northland (up 12.3% year-on-year to $539,000), Manawatu/Wanganui (up 27.8% to $402,500), Taranaki (up 14.1% to $430,000), Tasman (up 12.5% to $655,000) and Southland (up 32.0% to $330,000).

It also has Auckland’s median house prices increasing by 3.5% to $890,000 up from $860,000 at the same time last year. This was the highest price for the region in 33 months. And it reveals that Wellington remains a standout region, with four of its areas seeing new record median prices.

Twin Market Drivers

So what’s driving this widespread market revival? All the commentators point to two key drivers. One is the ongoing shortage of housing stock.

Independent economist Tony Alexander says property listings are in short supply virtually all around the country and chances are that this situation will be the new norm for a long period of time.

“The latest realestate.co.nz data shows us how short listings are. New listings received during the month of December for the entire country amounted to 7,874. This is the lowest number of new listings since data started in 2007.”

“This dearth of new listings being brought to the market means the stock available for potential buyers to pick and choose from is reduced.”

Alexander notes that property listings are short despite the rising supply of new houses. He says if capacity constraints preventing higher house building come into play that means extra realisation of upward pressure on property prices continuing.

The other key driver of the market upturn is the record low mortgage rates
that have been at play for some time now. ASB senior economist Mike Jones says they have long expected a mortgage rate-driven lift in house price inflation, but the pace of the upturn is running a little ahead of their expectations and certainly ahead of the Reserve Bank’s more circumspect view.

“Additionally, there looks to be a supply squeeze in play with listings at all-time lows. The worsening supply/demand imbalance is resulting in available houses selling faster, and prices being squeezed and house prices are now rising at a slightly faster pace than the usual relationship with house sales would imply.”

They suspect this dynamic will continue given that the pace of house sales is now clearly being held back by rock-bottom inventory, he says.

“But the macroeconomic support for housing demand (low mortgage rates, rising wage growth, strong population growth) remains very much in place. We expect the market upswing will continue to build momentum through 2020 before tailing off towards the end of the year.”■