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Reserve Bank predictions of housing market cooling not evident in Hamilton

Lodge Real Estate reports that the agency’s number of home sales in New Zealand’s fourth largest city, Hamilton, rose marginally during May.  As investors re-entered the market the median price in the city eased, as investors tend to buy in lower price brackets.

Lodge Real Estate Managing Director, Jeremy O’Rourke, said the continued strength of Hamilton’s market created questions over claims by Reserve Bank Governor Adrian Orr that the housing market was cooling. 

“Almost all properties that went to auction in May sold under the hammer or soon thereafter belying a cooling market. 

“The total number of properties sold by our agents was up on April and among them were four significant infill development sites around the city, pointing to returned investor and developer confidence,” he said.

O’Rourke said Orr’s claims the Government’s property investor targeted tax changes and signaled increasing the Official Cash Rate (OCR) from the middle of next year would cool the housing market quickly were completely out of step for Hamilton. 

“We can’t see any abatement for housing demand or price growth in Hamilton anytime soon.” 

Last week Orr said most of the factors driving house prices were either waning or disappearing, putting downward pressure on house prices. Orr added that house price growth would slow, significantly and soon. 

OneRoof’s latest figures show there are now four Hamilton suburbs where the median house price is over $1 million, up from zero one year ago, while the suburbs with a median price of $600,000 or less has shrunk from 20 to zero. 

“The difference in Hamilton, as compared to elsewhere in New Zealand, is we have significant development happening.  Hamilton’s strong economy is creating job growth as new businesses come to the city and existing businesses expand.  This is putting immense pressure on housing,” O’Rourke said. 

The imminent completion of the Waikato Expressway and the approval last month for Sleepyhead to proceed with its development at Ohinewai illustrates that the Hamilton to Auckland corridor, a long-term plan for development growth in the region, driven by central government, iwi and councils, was now a reality. 

Developments including the Ruakura Inland Port and development at Te Awa Lakes in Horotiu, further strengthened the growth projections for Hamilton, O’Rourke said. 

Hamilton city’s population is tipped to grow from 169,500 in 2020, to 205,400 in 2033 and to 236,600 by 2048, according to Statistics NZ population projections

“The housing crisis is still a reality whichever way the Government spins it. There are still not enough houses being built to support population growth and the number of people who need houses. Until there are, demand and prices will continue to rise,” O’Rourke said. 

He said property investors had sat back from the market for few weeks, as expected, while they digested the tax changes announced in late March, but they had returned to the auction rooms during May.  71% of houses listed for auction by Lodge sold under the hammer during the month. 

For the 15 properties that had not sold at auction, O’Rourke said first home buyers secured a good majority of the properties that were passed in on auction days.