Housing: National prices soar in February, but easing of growth could be on horizon

National property prices once again soared in February with several centres hitting new milestones, but moves by the Government and Reserve Bank are expected to see growth ease in the coming months.

CoreLogic on Wednesday released its latest House Price Index (HPI), finding that in February the national average house price increased 2.6 percent, taking annual growth over the last 12 months to 14.5 percent. That's a rate not seen since the year to October 2016 (14.8 percent).

The largest monthly change in property values for a city was seen in Dunedin, with 3.2 percent growth in February and 15.3 percent over the last year, equating to a jump of $81,000. The average value in the southern city is now $611,336, with CoreLogic saying it now takes about nine years to save the average deposit for a home there. 

Auckland prices jumped to just shy of $1.2 million with 2.9 percent monthly growth. This rise is attributed to a low number of listings and 32 percent of purchases being by investors in January.

Both Hamilton and Wellington hit new milestones in February. The average property value in the Waikato hub crossed $700,000 for the first time ever while the capital went north of $900,000.

Christchurch now has an average property value of $565,000, up 1.5 percent in February or 10.2 percent over the last year. It's the first time that annual growth has been in the double digits for the city since February 2014 when the market passed peak growth in the aftermath of the 2011 earthquake. 

However, Tauranga was the odd one out in February, with the average value there dipping 1.5 percent to $875,675. With 6.7 percent annual growth, CoreLogic says it's too early to call this a trend and Tauranga's unaffordability - with 43 percent of an average income required to service a mortgage - remains the worst of the main centres. 

CoreLogic is expecting the return of loan-to-value ratios (LVRs) will mean the current rate of growth will likely ease over coming months. 

After removing LVRs in April last year to promote cash flow during the COVID-19 pandemic, the Reserve Bank later announced they would return in an attempt to cool down the boiling housing market which went bananas over 2020.

From Monday this week, banks are now limited to no more than 20 percent of new lending to owner-occupiers with less than a 20 percent deposit while no more than 5 percent of new lending can go to investors with less than a 30 percent deposit. Some banks have already been voluntarily imposing limits and more restrictions will be imposed by the Reserve Bank from May.

CoreLogic also mentioned the Government's decision last week to tell the Reserve Bank to consider the impact of housing prices when making financial and monetary decisions. 

"While previously the RBNZ Governor, Adrian Orr, has expressed that the Bank has always done so, the latest communication is more explicit with regard to actively contributing to the Government's housing policy objectives, namely reducing investor activity and improving affordability for first home buyers," said CoreLogic head of research Nick Goodall.

"With the hard-line taken by the Government to reduce speculator activity, and now the Reserve Bank having somewhat of a mandate to assist them, the outlook for future property investment looks less certain, although, with the Prime Minister also declaring a desire to protect the wealth in our largest asset class, expectations are for a slowing of growth rather than a reversal."

On Saturday, Prime Minister Jacinda Ardern told Newshub Nation that the number of property investors was part of the issue in regards to our runaway housing market.

"What we want them to think about doing is how can you contribute to the productive economy in New Zealand? By going into an overheated housing market, it makes it so much worse for others and you won't necessarily get the long-term benefits that we'd like you to get."