New Zealand house price index rises in August, housing market likely to stay subdued

House prices in New Zealand grew 1.3 percent on a sequential basis in August, as compared with the 0.2 percent growth seen in the prior month. On a year-on-year basis, the house prices grew 2.1 percent, an acceleration from 1.7 percent.

In line with the recent trends, Auckland house prices underperformed the wider market in August. Auckland house prices rose 1 percent sequentially and dropped 2.6 percent on a year-on-year basis. In the remainder of New Zealand, house price inflation rose a strong 1.4 percent. This saw annual house price inflation pick up to 6.8 percent year-on-year from 5.9 percent in July.

While prices came in strong in August, house sales recorded a pull back, in line with soft listings. The seasonally adjusted house sales dropped 7.5 percent sequentially in August, more than reversing the 6.6 percent sequential bounce seen in July. Annual sales growth rose to -0.1 percent year-on-year from -0.4 percent in July.

The housing market tightened in August to around its historical norm. Regional housing markets outside Auckland and Canterbury continue to be tight, in line with divergence in house price inflation. Days to sell dropped, with markets tightening due to weak listings.

The marked stimulus to house prices in August might reflect support from lower mortgage rates in the past year, but the reversal in sales activity supports the view that the market is not expected to take off significantly from here, noted ANZ in a research report.

“While we expect the market to remain subdued overall, there is a risk that recent drops in mortgage rates do prompt a reignition in the housing market”, added ANZ.