Housing demand drives turnover upward

The latest REINZ data for Napier shows that July was characterized by very strong sales of 134. This evens out the relatively modest sales of 83 in June. Turnover above 130 in Napier last occurred in February 2008 soon after the market peak, however the market influences now are a little different to then.

The key driver in Napier is housing demand.

First home buyers taking advantage of recent incentive improvements has lifted demand for homes up to the $350,000 cap by 12% during the past year. Investors, many from outside the region, are competing for these homes looking for better returns than banks or shares can currently offer.

A softening of lending constraints and further easing in interest rates is benefitting sellers in higher price brackets as well. In particular turnover between $400,000 and $600,000 has improved 25% over the past year.

A lack of property available for sale is limiting the scope of potential house sales in the months ahead. At the start of August data from realestate.co.nz shows there were only 384 properties for sale, which is a massive 38% less than the last quarter of 2014.

Improved demand has had a positive effect on prices, which have stabilized. Quotable Value is reporting that prices have improved by 1.9% in Napier compared with the same period last year. QV’s Quarterly Price index shows that at current levels prices are within 2% of the 2007/2008 market peak.

Well-presented properties in popular localities which are correctly priced are attracting excellent interest, often receiving multiple offers and selling for above average prices.

However, in the background is a series of negative blows affecting economic confidence including slumping dairy prices, an early peak in the Canterbury rebuild, and the negative confidence shock associated with events in Europe. The Reserve Bank and the New Zealand dollar, have both responded to these shocks – with the Bank expected to cut the OCR further in September, and the dollar having depreciated 12% in the past three months.