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Summary
- National median house prices have risen by 19.8% in October 2020, with the median house price in Auckland hitting the $1 million mark for the first time, as per REINZ.
- RBNZ’s announcement on reinstating LVR restrictions could bring property investors rushing to market in higher numbers, and the launch of FLP programme could provide banks with more money to lend to home buyers.
- PM Jacinda Ardern stated that though the earlier focus was on constructing large houses on ample land, which needs to be shifted to building affordable homes for first-time buyers.
Median house prices across New Zealand have surged 19.8% YoY, with the median now at $725,000 in October 2020 compared to $605,000 in the same month last year, as per Real Estate Institute of New Zealand (REINZ).
The median house price in Auckland has hit the $1 million mark for the first time in October 2020, rising from $860,000 in October 2019. The REINZ HPI that measures the changing value of property in the market has struck a new high, gaining 13.5% YoY to 3248.
Bindi Norwell, Chief Executive of REINZ, stated that October would be recorded in housing history as the time when median house price in the Auckland region struck the $1 million mark for the first time.
However, Ms Norwell also added that this raised serious questions on the future affordability for residents in Auckland who want to buy a property. About 10 regions recorded median price rising in October.
Reserve Bank incentives that can affect housing prices
On 11 November, RBNZ announced that it would look at reinstating loan to value restrictions (LVR) on high-risk lending from March 2021.
The restrictions were earlier removed in May to encourage lending and home-buyers. RBNZ also plans to commence its FLP programme in December to provide banks with cheap funds.
ALSO READ: RBNZ aiming towards reintroduction of LVR mortgage restrictions
The central bank also confirmed a further postponement of the need for the retail banks to hold increased capital and has announced a further 12- month delay in increased capital requirements to July 2022.
As per Ms Norwell, Reserve Bank could go ahead with its proposal to re-establish LVRs before the 12 months is up particularly for investors, given the rise in prices observed in the past few months.
Market experts stated that restrictions on LVR could provoke property investors to rush into the market in higher numbers, and the RBNZ intends to lend more cheap money to commercial banks, which imply more funds to lend in turn to home buyers.
PM Jacinda Ardern’s take on house prices
PM Jacinda Ardern stated that she wants to make sure that the first home buyers could get into the market. She asserted that though numbers showed a rise in the first-time buyers in the market since 2017, but investors had remained the same.
She added that the prior emphasis was on constructing big houses on large tracts of land and not on building inexpensive housing that first-time buyers require. The focus has changed now. While interest rates are considerably lower than in the past, she stated that the relative affordability is now a big problem.
(NOTE: Currency is reported in NZ Dollar unless stated otherwise)
