Auckland house prices 'unprecedented' Reserve Bank says
Over the past three years, house prices have increased 52 per cent in Auckland, but only 11 per cent in the rest of New Zealand, the Reserve Bank said in its latest Bulletin.
That wasdivergence on an 'unprecedented" scale in this country's housing history. And in the past when the gap had become stretched, there had been an Auckland price correction.
The author of article Elizabeth Kendall wrote: "The extent of the current divergence between house prices in Auckland and the rest of the country is unprecedented."
"Historically, Auckland house prices have trended upwards relative to those in the rest of New Zealand. But in instances when they have deviated significantly from house prices elsewhere, this divergence has subsequently reversed to some extent."
Kendall wrote that: "Correction has occurred both via prices in the rest of New Zealand catching up to those in Auckland, and by Auckland prices falling to levels more consistent with those elsewhere."
But, she said the article did not attempt to pass judgement on whether Auckland house prices would fall, nor whether house prices in the rest of New Zealand would significantly lift. "Rather, it provides historical context for the current house price upswing."
The Bulletin article comes in the week when the 12th annual Demographia housing affordability report was released showing the median Auckland home cost 9.7 times the median household income- $748,700 on a median income of $77,500.
Real house prices were now more than three times what they were in 1965, Kendall reported, but there had been several instances where real house prices had fallen.
Since 1965, there had been six distinct periods of high real house price inflation, the largest seen in the mid-2000s, when real house prices increased 77 per cent.
"How long the upswing will endure, and therefore the magnitude of the increase, is yet to be seen," she wrote.
After both the early-1970s and mid-2000s upswings, which were the largest, real house prices fell, she said.
"Following the cycle of the 2000s, real house prices fell 15 percent by mid-2011. However, this unwound only a third of its previous increase. Consequently, the most recent housing market upswing started from a high level of real house prices relative to history."