In today's email we look into the latest figures on the property markets around the country.
1. Housing perks up again
March is one of those 'moment of truth' months for the housing market where the noise around the summer holidays fades away and we start to see what's really going on.
It's also been a month where, in 2014 and 2016, the Auckland market took off again after a few months of hiatus after two rounds of regulatory interventions. Some people have been saying in the wake of last year's intervention by the Reserve Bank that this time is different, thanks to a turning of the credit cycle and rising interest rates.
The Reserve Bank itself has been careful not to say the genie was back in the bottle for good, but some other economists have called a top.
But since February, interest rate increases have stalled and net migration has kept rising to record highs. Building consent growth has also stalled in Auckland since September, and apartment developers are struggling to get funding. That has led some, including Standard and Poor's, to suggest house prices in Auckland could start rising again there because supply shortages are not being addressed.
So March's figures on house sales volumes and prices were always going to be closely watched.
The Real Estate Institute released its figures for March](https://reinz.co.nz/residential-property-data-gallery) on Thursday. They showed a pick up in sales volumes and a slight perking up of a prices in Auckland, although there is still plenty of noise to sort through.
The raw Auckland median sale price rose by $90,000 in the month of March to a record high $890,000 and sales volumes rose 66.2 percent in the month. But those figures were exacerbated by more sales of more expensive houses than cheaper houses and by the usual seasonal increase in March from February.
2. Volumes up in Auckland
REINZ reported volumes rose three percent in seasonally adjusted terms in Auckland in March from February, while the seasonally adjusted median rose 3.2 percent in the month. ASB estimated a 5.9 percent rise in seasonally adjusted volumes in Auckland in March.
The REINZ also released a new version of its stratified House Price Index. It was developed with the Reserve Bank to filter out the noise of changes in the composition of house sales. For example, the Reserve Bank's requirement for landlords to have a 40 percent deposit from late last year slowed sales of cheaper rental properties, while more expensive properties continued selling. That had the effect of lifting the raw median.
The REINZ House Price Index was flat nationally in March from February, but was up 10 percent from a year ago. It was up 0.8 percent over the last three months.
The index for Auckland was down 0.3 percent for March from February, but was up 0.2 percent from three months ago and up 8.3 percent from a year ago.
The stratified median prices, which REINZ does not release publicly and sells to banks and others, showed a slight increase in Auckland and a four percent rise nationally to $541,975.
3. Wellington up strongly
Looking through all the noise in the figures, Auckland has perked up in March after a few months of a slowdown and housing markets elsewhere were certainly perky - particularly Wellington. The House Price Index for Wellington rose one percent for the month and was up 3.5 percent over the last three months. It was up 18.8 percent from a year ago.
Those hoping last year's Reserve Bank intervention and the rise in mortgage rates at the end of last year would be enough to stop house prices rising may have to wait a bit longer for confirmation. Interest rates have stopped rising, housing supply has stalled and net migration is still at record highs.
March's figures showed some warmth returning to the market, although the jury is still out on whether it is a repeat of the sharp rebounds seen after the first two versions of the Reserve Bank interventions.
4. Food deflation
One key factor to watch in the economic and housing price outlook is inflation, which has been forecast to bounce back into the Reserve Bank's one to three percent target band this year.
But there have been a few signs in recent days from overseas and from here that inflation may not cooperate. US inflation data on Friday was weak and US long term interest rates have stopped rising as doubts grow about Donald Trump's ability to lift growth and inflation through fiscal stimulus and tax cuts.
Inflation is far from taking off here too.
Statistics New Zealand reported on Thursday that food prices fell 0.3 percent in March from February and were up 1.3 percent from a year ago. Lower fruit and vegetable prices were the driving factor. Grocery food prices were up 2.2 percent from a year ago, with higher milk, cheese and butter prices the key driver.
5. Attacking Simon before he starts
Parliament nominated Simon Upton, one of the architects of the Resource Management Act (RMA), as the next Parliamentary Commissioner for the Environment on Thursday.
He is due to start in October and succeeds Jan Wright after her 10 years in the role.
But Upton's appointment wasn't supported by everyone.
New Zealand First Deputy Leader Ron Mark said he was stunned by the appointment and that all other parties accepted him.
"How can we accept a re-tread who’s been a National Party Member of Parliament for 19 years, a cabinet minister who in the pantheon of cabinet ministers, is right up there with Dr Nick Smith," Mark said.
"The three previous commissioners have all been highly qualified scientists devoid of political entanglements. Not Mr Upton who is donkey deep inside National’s old boy’s beltway network," he said, adding New Zealand First would not accept the appointment in Government.
6. The Parliamentary lucky dip
Four private members's bills were drawn from the Parliamentary ballot on Thursday, including Stuart Smith's Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Bill.
ACT's David Seymour said he would support the bill, which is designed to make it easier for building societies to compete with banks and others.
7. Coming up...
Parliament is not sitting this week, but the big economic event will be March quarter inflation figures on Thursday morning.
They are expected to show inflation picked up to around 0.8 percent in the quarter, taking annual inflation up to 2.0 percent, largely because lower petrol prices have dropped out of the year-ago comparison and tobacco taxes rose.
The increase will, however, be higher than the Reserve Bank's February forecast for a 1.5% rise in for the year, although it is expected to ignore some of the one-off factors in the apparent increase.
8. One fun thing
Otago University Economist Andrew Coleman spoke last Wednesday at a Motu seminar on the distortionary effects of the lack of taxes on housing. Unfortunately, I could not make it, but here are his slides and I'll be following up on it.