New Zealand house sales rose to the highest in almost six years as prices surged, adding to a property market boom that Finance Minister Bill English said might trigger an earlier increase in interest rates.
House sales climbed 11 percent from March last year to 8,128, the most for a month since May 2007, the Real Estate Institute of New Zealand said in an e-mailed statement. House prices advanced 8.6 percent from a year-earlier, led by a 16 percent jump in Auckland, home to a third of the nation’s 4.4 million people.
English today joined central bank policy makers in warning that rising house prices may increase household debt levels and could fan inflation, prompting an interest rate response.
“The current rate of house price inflation, if it continues, is likely to be accompanied by higher interest rates sooner, and higher exchange rates,” English said in a speech in Wellington. “Progress on debt reduction has slowed and household debt is rising again as the housing market heats up.”
Central bank Governor Graeme Wheeler said March 14 that he expected to keep the official cash rate unchanged at a record-low 2.5 percent this year. His deputy Grant Spencer said April 8 that stance may change were rising property demand to stoke a damaging housing boom.
The central bank has kept borrowing costs unchanged since March 2011 to help the economy recover from devastating earthquakes and a global slowdown that curbed exports. Wheeler is reluctant to raise interest rates because the nation’s currency is rising and a drought may slow growth this year, he said last month.
New Zealand’s dollar has gained 3.6 percent against the U.S. currency this year, the best-performing Group of 10 currency. The so-called kiwi bought 85.50 yen at 3:42 p.m. in Wellington. Earlier it reached 85.78 yen, the highest since February 2008.
“Our exporters are already struggling against the headwinds of a high exchange rate,” English said. “Households with high debt levels will be adversely affected by any increase in interest rates.”
House sales in March rose 3.6 percent from February after adjusting for seasonal influences, the Real Estate Institute said. Prices gained 2.4 percent from February, the biggest monthly gain since March 2007.
Sales in Auckland and Christchurch make up 52 percent of national transactions and 90 percent of the annual increase in prices, the institute said.
“There’s a real danger that the Auckland housing market is mistaken for the New Zealand housing market, and that regulatory decisions are made on the assumption that conditions in Auckland and Canterbury are replicated across the rest of the country,” Chief Executive Officer Helen O’Sullivan said in the statement. “Across the rest of the country, price gains are far more modest.”