Does the Reserve Bank have a good reason to try to slam the brakes on the housing market? You often read articles talking about house price increases which seem too ridiculous to fathom, but how normal is this for Auckland? Is this the start of another boom or just a little bump before a cliff? Below you will find a graph which illustrates the percentage change in house prices. It is interesting to note that it is common to have increases above the ten percent mark. 
After a pretty serious financial catastrophe in 2008 we saw dramatic decreases in house prices, for almost 2 years. Now, after clambering out of the recession, we have seen some very dramatic increases in the past year, surprisingly, well before the economy has kicked into high gear.
I guess the thing on the Reserves Banks mind would be the potential increases we might see once we actually have a buoyant and seriously confident economic backdrop. Looking a bit deeper into the increases in Auckland we find that the North Shore is heading towards becoming a serious challenger to Auckland Central. On the other hand areas previously considered to be more volatile in tough times now seem fairly stable. 
The Reserve Bank’s new act of holding first home buyers at the gate may also act as a kind of insurance policy for property investors, since any dramatic slow down in the property market would be preceded by the Reserve Bank opening the flood gates; allowing investors to offload their assets. An interesting story should reveal itself over the next two months – namely the impact of the new Reserve Bank restrictions. From feedback from many real estate agents in the market, we are hearing stories of more willing vendors and a more stable pattern of purchasing moving forward. That said, we still feel that it is hardly a buyers market. With low interest rates around and secured on the horizon there is little rush to sell up. Further there is much less motivation to sell from home owners unable to trade up due to new LVR restrictions. 
The talk about freeing up land is still just that; With the average subdivision usually costing more than $80k before getting a title, profits have to be well in excess of this amount before anyone pulls out a hammer. Its ok for areas where more than $150k profit can be made easily from the process. Unfortunately the bulk of the areas with a lot of land do not offer the profit margins required to make the risk worthwhile .
