11 August 2009
House prices in New Zealand will rise by 24 per cent over the next three years due to low interest rates and a shortage of new housing, Infometrics has predicted in a report prepared for mortgage insurer QBE LMI.
Prices could grow by as much as 11 per cent nationally in the year to June 2010, the report said.
“This positive growth is expected to moderate over the following two years as residential construction activity regains momentum,” QBE LMI chief executive Ian Graham said.
“On average, property is now also taking a shorter length of time to sell. The median length of time for sale has improved from an average of 58 days in July 2008 to 41 days in June this year. The level of competition among buyers has increased as financing costs have fallen and the number of properties on the market has dropped away,” he said.
“Although residential building activity has been at very low levels over recent months, residential consent numbers are forecast to climb back towards 1,500-1,600 per month by the end of this year, and hold in the 1,700-1,800 range throughout 2010. Further growth in building activity is expected in 2011/12,” he said.
“‘Housing affordability has improved on a national level and the level of demand amongst buyers has increased. With improved credit conditions and record low interest rates, the motivation for first home buyers and investors to enter the housing market have never been more compelling.”
“With a lack of available finance for developers, a significant shortage of new housing is arising in New Zealand and is expected to continue into 2010. The underlying demand for new houses is sitting at 21,000 per year which is strongly driven by an increase in net migration and a reduction in New Zealanders moving overseas. This undersupply of new dwellings, will contribute to an increase in property prices over the next three years,” Graham said.
The report said that although house prices were still lower than a year ago, some upward momentum looked to have appeared since the start of 2009 and that further improvement would be consistent with the trends in sales activity and the rate of turnover.
Infometrics based its forecast rises on the average median house price from the three months to June 2009. The national median is forecast to rise to NZ$419,400 by the end of June 2012 from NZ$339,200 this year.