Market Commentary April 2016


The last month – Highlights on key market indicators

  • Interest Rates: The RBNZ cut the OCR by 25bps last month – down to 2.25%. It cited slowing global growth and declining inflation expectations. We may see an even lower OCR. What does this mean? Interest rates are unlikely to tank any time soon.
  • Net Migration: Auckland is continuing to see high levels of permanent migrants. Statistics NZ reported that in February, Auckland’s population increased by about 3000 people. Based on the Auckland average occupancy for houses of three people to a property, theoretically 1000 additional properties would have had to become available in the month to house such growth. See the graph below – Auckland’s demand is still growing at a greater rate than supply. This is really the big storyteller.
  • Supply – We can expect construction costs to rise as a result of more costs attached to the new health and safety regulations.

Housing Supply – Demand Balance, New Zealand

Housing supply3








Auckland Outlook Summary – Upshot for March

Auckland’s market has well and truly finished taking a breather, and is now ramping up again. As you can see above, this is underpinned by a worsening shortage in supply. The drop in OCR will also have reinforced the message of lower interest rates, enticing even more buyers to market. I have had a look at Barfoot and Thompsons March figures as they are released sooner and as they sell 40% of Auckland’s residential stock, it is a worthy snapshot. Both the average and median prices for March were close to record highs – the median price being up 8% on February’s result. I expect the REINZ figures to tell a similar story.
Regional activity is being well underpinned by investor activity in a range of regions, but the Auckland market is not going to be a casualty, as thought by many commentators earlier in the year. There is clearly room for both.

Rental Market

Rents in Auckland overall increased 5.6% from Feb 15-Feb 16. One of the most interesting “takeaways” is the growing growth gap between 1-2 bedrooms and all others. Smaller housing configurations are experiencing greater rent increases – Just under 8% vs just under 5% for 3-4 bedrooms. There are 2 possible explanations here – Auckland has a growing population which will favour smaller configurations, and smaller configurations reflect Auckland’s growing rental unaffordability. The median weekly rent for Auckland is now $500, which is roughly half of the average Auckland family take home income.

Source:, Statistics NZ, ANZ