New milestone may be the last for a while in property prices

Residential property market prices set a new record in May, although they rose at a lower rate than previous months’ frantic growth rates, says the Real Estate Institute (REINZ).

Friday, June 15th 2007, 12:21PM

by The Landlord

REINZ national president Murray Cleland today reported a new record national median residential house price of $350,000, for May, which he describes as “something of a milestone”.

But Cleland notes that despite higher prices in most regions, there were signs that the surge in prices over the first half of this year was slowing.

“Whether it’s the gathering interest rate clouds or the market anticipating the increase in the official cash rate last week, the market is showing signs of taking a breather.”

Cleland says the national median increased by just $1000 in May from the April figure of $349,000.

“But this month’s relatively modest increase has to be seen against the background of the median price over the previous four months which increased from $335,000 in February to $343,500 in March, then $349,000 in April.”

Sales recovered from 8,194 in April (the month’s figures influenced by public holidays) to 9,285 in May, compared with 9,642 in May 2006, while days to sell rose from 28 in April to 30 in May, indicative of a slowing market.

Real estate consultant Mark Ferguson says some slowing is to be expected. “The market has been on fire and the high growth rate is unsustainable at such levels,” Ferguson says. “The winter market normally cools price growth – it just hasn’t been that way for the last four years.”

He says higher interest rates are having an effect on both first homebuyers and investors in particular, with second and third homebuyers coming off fixed rates and having to fix at a higher one. “This will curb their interest in stepping up to a higher price level by taking on a bit of an extra mortgage. Media commentary about how the market must cool or is cooling is slowly having an effect on the general psyche.”

Southland continues to lead price growth with its own little property boom of recent months, showing a 36.15% increase at $177,000 for May compared with $130,000 a year earlier.

Wellington moved into the second spot in national price growth figures with a 22.22% increase over its May 2006 median of $315,000.

The Wellington region median price was up strongly from $377,900 in April to $385,000 in May, driven largely by substantial price increases in Lower Hutt and Wellington city. The Hutt Valley median was up from $333,000 to $347,000 and the Wellington central median rose from $430,000 in April to $445,000 in May.

Taranaki is now third, with a 20.34% increase from $233,500 to $281,000.

Prices in the Auckland market eased from $452,000 in April to $450,000 in the latest month. The metropolitan Auckland median price was down from $459,000 in April to $451,000 in May, the Auckland city median price was down from $510,000 in April to $492,000 in May and the North Shore median was back from $540,000 in April to $535,000 in May.

The national median is now 14.75% up on the May 2006 figure of $305,000, at $350,000 in May 2007.

Of the 12 real estate regions surveyed, seven experienced increases while five experienced easing median prices.

Northland continued its recent strong performance with a median up from $320,000 to $330,000 in May.

Waikato and Bay of Plenty were up from $312,500 to $315,000, but Hawkes Bay eased back from $280,000 in April to $277,000 in May.

Manawatu and Wanganui also fell back after recent strong growth from $230,000 in April to $222,000 in May, but Taranaki remained buoyant, up from $275,000 in April to $281,000 in May.

Nelson and Marlborough eased from $330,300 to $328,000 and Canterbury and Westland dropped back from $310,000 to $305,000.

Central Otago Lakes was as unpredictable as ever with a median up from $430,000 to $485,000, largely as a result of relatively high values and lower volume. Otago was up from $227,000 to $240,000.