9 Dec 2011

Real Estate Institute plays down boom talk

8:27 am on 9 December 2011

The Real Estate Institute says rising values in the Auckland property market are a recovery, not a boom.

Quotable Value said on Thursday that property values in Auckland are now the highest they have ever been.

The Real Estate Institute will release figures on Friday confirming that property prices are rising.

REINZ chief executive Helen O'Sullivan says sales volumes and values are improving, led by the Auckland market, but are still down on the real peak of 2003.

"I don't see boom here, I see recovery from quite a prolonged period of decline," she says.

She says there were about 10,500 transactions in November 2003 while if there are 6000 transactions this month that will be a sign of good growth.

Property market investor Olly Newland says he would be very concerned if the housing market in Auckland went into a boom.

Mr Newland told Morning Report the market is frothing and certainly not collapsing as some commentators had been predicting.

He says there is greater confidence than there has been in the last three years.

Mr Newland says a combination of factors, including record low interest rates and the leaky home controversy, are at play.

Rodney Dickens from Strategic Risk Analysis says a steady growth of house prices could eventually hurt New Zealand's economy.

He says residential property is becoming less affordable and that will harm the country's competitiveness.

"If you limit supply and demand grows, prices go up. For future generations of Kiwis who want to live in affordable housing, it makes it really tough on them," he says.

Mr Dickens says New Zealand is a trading nation and the housing affordability situation makes the country uncompetitive in one of the biggest costs of living.

He says property prices can stimulate growth in consumer spending but that is not the export led growth the country needs.