House prices in New Zealand remain stubbornly high, especially given the challenges of the surrounding economic environment. According to Westpac economists, prices are expected to rise 15% in the next year alone, with RBNZ predictions slightly lower with around 10% growth forecast. The rate of domestic property growth is largely based on location, however, with prices much healthier in some parts of the country. According to the latest data from the Real Estate Institute of New Zealand (REINZ), we can expect strong national movement to continue throughout 2021, along with significant discrepancies between cities, regions, and suburbs.
In the latest figures, the REINZ national median selling price was up by 5.2% in October, putting it ahead by 19.8% over the last 12 months. However, the REINZ House Price Index (HPI), which is generally considered to be a more reliable indicator, increased by 3.5% and 13.5% respectively. There are a few reasons for this discrepancy, with median prices a good indication of market movements but also widely affected by the mix of properties sold. When analysed together with regional and other location-based data, the differences between median and index data may be due to a growing discrepancy between top end and low end property sales.
According to the REINZ HPI, Auckland property values recorded 15.4% growth for the year and 3.5% growth for the month. Auckland City had the strongest annual growth figures in the Auckland region at 16.6%, and Waitakere City had the best growth in October at 5.5%. Across the rest of the North Island, Hamilton City recorded the strongest growth at 17.8% for the year, with Napier City leading the way with 6.1% in October. Overall, Auckland and much of the North Island has seen tremendous growth over the last few months, at a time when few people expected it.
However, despite healthy growth in the north, the biggest price increases over the last 12 months have occurred in the Wellington region. Wellington values grew by 16.7% for the year and 5.5% for the month, with Upper Hutt City recording very strong growth at 24.6% for the year, and Wellington City hitting 5.6% for October. The South Island was much more subdued, including Invercargill City with 10.7% growth for the year, and both Queenstown-Lakes District and Dunedin City leading from the front with 3.6% growth for the month.
According to separate data from Westpac, the house price surge is just getting started. In a new report, chief economist Dominick Stephens said "By mid-2021 we expect house price inflation will be 15 per cent, roughly the same as 2016... The political and social fallout will be just as intense as it was back then. But that doesn't mean the RBNZ is going to reverse course – if it did, deflation and high unemployment would beckon. We still expect that the RBNZ will cut the OCR below zero next year, while simultaneously slowing the quantitative easing programme which will run low on fuel."