New Zealand residential property values climbed at the fastest pace in nine months in March, led by strong demand in Auckland.
National property values rose 7.7 percent over the past year, accelerating from the 6.4 percent increase in February, and at the fastest pace since last June, according to state-owned valuer Quotable Value. Auckland, the country's most populous and fastest growing city, led the index higher, with property values advancing 13.9 percent, ahead of the 13 percent rise the previous month.
The National-led government wants to increase the availability of affordable housing, particularly in Auckland where prices have surged ahead of the rest of the country as a lack of supply fails to meet increased demand from a growing population. Reserve Bank governor Graeme Wheeler earlier this year warned policymakers the nation's biggest city has a shortfall of between 15,000 and 20,000 properties to meet population growth, and the 7,500 annual consents for new building permits is lagging behind the 10,000 it needs to address the shortage.
"The expectation is that Auckland will continue to accelerate while the rest of the main centres will remain steady with values either moderately increasing, staying flat or in some cases declining slightly," QV spokeswoman Andrea Rush said.
The central bank is concerned that an overheated property market could lead to financial instability and has flagged the introduction of further macro-prudential tools to help cool the market, without having to raise the official cash rate any further.
"The Reserve Bank is considering tighter rules on borrowing to property investors which it has said may now be defined as those who own more than one property and thus could cover any property the owner does not live in," Rush said. "Currently close to 40 percent of all residential house sales in New Zealand are purchased by those who own two or more properties and the Reserve Bank's changes could come into effect as early as July 1 this year."
Demand from the Auckland market is also spilling over into nearby regions, QV said. Residential property values in Hamilton City rose an annual 3.4 percent, with houses going to auction "reaching good prices due to high demand".
"Aucklanders are still coming down to Hamilton to purchase properties, either to move here permanently or to invest in the relatively more affordable homes here," QV Hamilton valuer Nicky Harris said. "Investors are still very active in the Hamilton property market."
Property values in Wellington increased an annual 0.5 percent, Christchurch values rose 5.3 percent, Dunedin gained 0.6 percent and Tauranga advanced 5.1 percent.