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By BERNARD ORSMAN
The Auckland property boom is showing no signs of sinking as the price of the
average house surges towards $300,000.
The combination of low interest rates, immigration, rock-bottom international
share markets and a shortage of listings is making Auckland irresistible to
home-buyers and investors.
Would-be buyers are being gazumped in the scramble to secure properties.
This week, the real estate market - running a parallel but more subdued course
in the rest of the country - received a fillip when Reserve Bank Governor Alan
Bollard left interest rates unchanged at 5.75 per cent and indicated they would
stay at present levels over the next two years.
This means borrowers can expect mortgage interest rates to remain steady.
The Bank of New Zealand also reported this week that Auckland house prices are
11.9 per cent higher than a year ago, taking the cost of the average home from
$260,000 to $290,000.
"Is the market overvalued yet? No," said BNZ chief economist Tony Alexander.
The gap between Auckland house prices and the rest of the country is also
widening. The national median price is $188,000, 8.5 per cent higher than a year
ago.
Figures from the Real Estate Institute show the surge is greatest in Auckland
City, where the average house now changes hands for $335,000.
Motorway fright has led to runaway demand for inner-city suburbs.
Prices are rising at the rate of nearly $500 a day, says real estate company
Barfoot and Thompson.
But the North Shore is showing signs of cooling. Its median house price has
dropped $2000 to $298,000 in the past month.
New three-yearly council revaluations show that North Shore houses increased 5
per cent in value compared with 1999.
In Auckland City, the average increase was 13.1 per cent.
Reserve Bank figures show that the cost of a cheap house in Auckland is about
$190,000, marginally less than the $210,000 average cost of a top-end house in
the rest of the country.
The Reserve Bank has also said household debt had climbed 8.9 per cent in the
past year to $80 billion, most of it tied up in mortgages.
This growth is considered reasonable.
ASB chief economist Anthony Byett said Auckland property prices would not stop
riding before Christmas, and probably not before the middle of next year when an
increase in new house construction came on to the market.
Auckland was in catch-up mode after a flat three or four years, Mr Byett said.
Even when prices did peak, the market would "simmer" rather than collapse Around
the world, disillusioned investors have turned from shares to houses.
The Economist house indicator of 13 countries found house prices continue to
outpace inflation almost everywhere.
In Brisbane, house prices have soared 30 per cent in the past year.
In Auckland, immigration, expatriates returning home and the population drift to
the city are the main reasons for demand outstripping supply.
Most of the 53,000 new migrants in the past year settled in Auckland.
Many of the 24,448 consents for new buildings in the year to September were for
Auckland apartment buildings to accommodate the increasing number of foreign
students coming to New Zealand.
Those looking to rent are in a scramble for properties.
Barfoot and Thompson city rental chief Trevor Elwin estimated Auckland rents had
risen a third this year.
The firm says average rents rose $20 last month, the steepest rise of any month
this year. Its rentals manager co-ordinator, Helen Hodgson, said the average
Auckland rent in January was $298, but is now $332.
House buyers are finding the competitive market hard work. When they do find a
house, they face fierce competition.
Vendors have started inserting clauses in contracts giving them time to find
another house - something unheard of two years ago.
Further reading
http://nzherald.co.nz/property
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