Where are NZ house prices? – hitting new highs?

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I thought it was about time to examine the latest house price data from REINZ. My favoured set of data is the Stratified house price index which as I have stated before is a more accurate reflection of true house prices across the country than the pure median.

The latest figure for March showed that house prices in NZ hit a new high of $409,080. This is the first time this measure has broken through the $400,00 level and represents an 8.6% rise over the past 12 months.

Interestingly the rise in the past year represents only just more than the rise since the peak of the market, now over 5 years ago in November 2007. Price today are just 7.4% ahead than that peak. As the chart shows the market fell by 11.4% over the first 14 months to a low of $337,400 before initially rebounding in 2009 and then slipping sideways through 2010 and starting to recover in early 2011 before starting the ascendancy to climb through the prior peak which was passed in May 2012.

The rate of increase in appreciation of property prices as shows in the chart above has been growing significantly over this last 18 months edging ever closer to 10% on an annualized basis. No signs yet, of the heady days of 2002/2003!

However when assessing the appreciation of any asset over time it is an oversight not to factor in the impact of inflation. A basket of goods valued at $100 in 2007 at the very peak of property prices would now cost $114.54. Sure the recent years have seen low relative inflation, but the compound impact of inflation cannot be ignored.

Property prices adjusted for inflation shows a very different story for the past 6 years as the chart above details. In today’s $ terms the peak of the market price in September 2007 actually equates in todays $ terms to $436,508. That compares to today’s price of $409,080 – so in fact we have not as yet broken the peak of the property market pricing. We have not hit a new high. Property prices are still 6.3% below the peak.