Low interest rates feeding green shoots against a backdrop of uncertainty.

July’s positive sales numbers add some energy to the property market which should be further bolstered by Reserve Banks of New Zealand's (RBNZ) big August Official Cash Rate (OCR) cut.  


Off the back of a mooted capital gains tax being dropped, Loan to Value Ratio (LVR) restrictions being eased and record low interest rates, July's numbers could be the first sign of green shoots of growth returning to the market.

Residential property sales increased by 3.7% in July year on year to 6,118 (up from 5,897), the highest for the month of July in three years, according to the Real Estate Institute of New Zealand (REINZ).

The regions led the charge on volume lifts, with Nelson’s 25% increase boosting sales to the highest July number in four years. Gisborne was second with a 14.9% increase and Canterbury bounced up by 14.6% in July 2018.

Auckland’s numbers were impressive given its recent sluggishness, with sales in July increasing by 6.6% year-on-year (to 1,894 up from 1,777).

The West Coast, Tasman and Southland all bucked the trend recording significant drops in properties sold.

Bindi Norwell, Chief Executive at REINZ says: “This is the first time in eight months that we’ve seen the number of properties sold around the country increase on an annual basis suggesting that we’re starting to see some early signs of growth”


Value wise median house prices are still trending up nationally, despite being flat in Auckland. Much of this is being driven by a continued catch up effect being experienced in regional New Zealand, which is seeing much of the strongest growth in median prices.

Nationally median house prices increased by 4.5% in July to $575,000. Due flatness in Auckland market median price increases for New Zealand excluding the City of Sails were even stronger, recording a  6.1% increase on last year to $485,000.

July was also a month of records in the south, with Otago’s 21.7% increase to $505,000, and Southlands 20.0% increase to $300,000 setting all time high median house values for these regions.

Its wasn’t all one way traffic with values decreasing or remaining flat in six regions, led by a steep 24.4% fall on the West Coast and more modest decreases of 5.9% and 4.0% in Marlborough and Taranaki.

The REINZ House Price Index (HPI) which takes into account the type of property sold to try to give a more accurate representation of price changes, also showed an annual increase of 1.5% in July. 

Excluding Auckland the increase was 5.9% taking the index to a new record high of 2739. Auckland’s HPI decreased -3.3% year on year but has still tracked up slightly over the last three months.

Days to Sell

There was a slight increase year on year in days to sell by 3 to 40, but this was down from 41 days last month so it’s moving in the right direction.


Year on year rental prices continued their march upwards, with a 3.3% rise putting more pressure on renters already facing record high rental prices in many areas. The rate of increase month on month was tracking close to sustaining the annual rate with a 0.3% increase between June and July.

The flow measurement of rental property prices fell 0.7% , its third straight monthly drop. This index measures rental price changes of tenancy which have new bonds lodged against them and is often seen as a lead indicator for changes, so it would be worth keeping an eye on the next few months to see if this is a blip or a trend emerging. 

Regardless rents are still high and have risen significantly in recent times and given the low interest rate environment many first home buyers are making the switch from renting to owning, making up almost a quarter of all sales in the current market.

Where to now?

Despite signs of growth backed by record low interest rates and the recent loosening  of LVR restrictions with the talk of possibly more still to come, there are still significant uncertainties which exist.

The RBNZ’s capital review and its standoff with Australian owned banks could impact the cost and availability of capital.

In the latest chapter of back and forward between the RBNZ and NZ’s large Australian Banks, ANZ has flagged a potential reduced presence in New Zealand. This comes off the back of RBNZ’s capital review and the Australian Prudential Regulation Authority (APRA) saying it would lower the amount of capital Australian banks were permitted to allocate to operations in foreign jurisdictions. 

The economy also continues to show weakness with the OCR cut and very low business confidence reinforcing the view that all is not rosy.

However despite being beaten by the regulatory hammer in recent years there appears to be some talk of emerging activity within the investor market. Record low interest rates are acting as a double boost for this sector making debt more affordable in the short term and reducing returns on other investments such as bonds and savings, making rental yields look more attractive. Mortgaged multiple property owners (investors) gained in market share to 25% in July, returning them to levels not seen since 2016 according to CoreLogic.

So the roller coaster continues and its important to keep an eye on the numbers in coming months as well as the Reserve Bank and Government to see what way things might swing.

I will keep you in the loop and make sure you are well positioned to assist your clients in navigating whatever is thrown at them.