Housing shortage boosts prices

Some city home buyers are paying too much for houses as demand outstrips supply.

A Quotable Value (QV) report, released today, shows a split housing market, with competition for cheaper homes while more expensive properties take longer to sell.

Christchurch's average house price in the three months to October 31 was $352,962, 1.3 per cent above a year ago but still short of the $365,000 peak in early 2008, QV figures show.

Property values dipped in 2008, but had picked up this year as sales increased.

QV valuation manager Glenda Whitehead said too few homes were for sale in New Zealand's main centres.

This was causing a market imbalance, and pushing up prices at the lower end, she said.

"Our valuers are seeing many properties sell for well above their expected values," she said.

The cost of breaking mortgages was stopping some homeowners from selling.

Others were worried they would struggle to find another home because of the lack of listings, Whitehead said.

QV Christchurch valuer Melanie Swallow warned buyers to be careful.

"Because there's a shortage in that particular part of the market, agents are recommending auction, and it's proving to be tremendously successful," she said. "We're aware of examples of properties selling above market price and it's creating a bit of a bubble. Buyers who have missed out on two or three homes are going to auctions and having to compete against some serious bidding."

Swallow said a two-bedroom Christchurch bungalow sold last week for more than 10 per cent above its market value.

She warned would-be buyers to get independent advice.

In provincial areas, the number of buyers and sellers was more evenly balanced, Swallow said.

Harcourts Grenadier auction manager Roger Dawson said the company's Christchurch rooms were seeing selective competition among bidders.

Properties with good locations, renovation potential, or higher-density zoning were in demand, with home buyers, investors and developers all showing interest.

More expensive homes were not attracting the same demand, but that was starting to change, Dawson said.

Whitehead said demand-based price rises would continue until buyers balked and looked elsewhere, or stayed put.

Mortgage lender Cairns Lockie said that with increased immigration and only a fraction of the number of houses being built compared with about a year ago, the housing shortage would push up prices.

Westpac chief economist Brendan O'Donovan said home building would need to "pick up sharply" to avoid a severe housing shortage.

O'Donovan expected a brief return to double-digit house-price inflation.

Statistics New Zealand figures show the nation's population rose by nearly 47,000 in the year to June, boosted by a net migration gain. In the same period, house building halved, with just 12,309 new homes approved in the year to June.

The average house value nationally is almost unchanged from a year ago at $389,198, QV figures show.

Prices in most central and eastern South Island districts were also close to a year ago, while in the west and south changes in values ranged from a 4.3 per cent rise in Dunedin to falls of 9.4 cent in the Queenstown Lakes area, and 9 per cent in the Grey District.