It’s been a while since we’ve reported that the volume of sales in a month in 2016 was significantly less than in 2015. That’s the case in August 2016 (26% less than 2015) and July 2016 (24% less than 2015). Rather than demand, the primary reason for only 95 sales in August is related to constraints in supply.
The total number of properties for sale continues to be at very low levels – less than 11 weeks’ supply, which (next to Wellington) is one of the lowest in the country. As a result, there is little choice for eager buyers.
This is contributing to rising prices in most areas, with the volatile REINZ median price indicator peaking at $371,000 in August (this does tend to rise and fall month by month). The less volatile Quotable Value House Price Index shows that prices at the moment are 16% higher than last year. Good news for sellers, who during the previous 5 years saw negligible price appreciation.
The Reserve Bank recently confirmed that LVR restrictions will apply to residential property investors who will now generally need a 40 % deposit for a mortgage loan, and owner-occupiers will generally need a 20 % deposit. In both cases, banks are still allowed to make a small number of loans to borrowers with smaller deposits.
While the new rules take effect on 1 October 2016, most banks have started to follow the new limits already. This has contributed to a cooling in demand from investors and first home buyers, and this is likely to continue.
Generally, the expectation is that some heat will come out of the market across the country in the coming months.