The latest monthly house price index published by QV confirms that Auckland values are rapidly rising again. In the three months to January values increased 5.1% which equates to over 20% annually. This is considerably faster than the 1% to 2.5% rate of increase per three months we saw throughout most of 2014, and faster than any other time since 2003 at the start of the previous boom.

Nowhere else in the country is rising like Auckland. During 2013 values were rising in post-earthquake Christchurch and surrounds at a rate not far behind Auckland’s. But in the last three months values in Christchurch have risen only 1.7%, continuing a slowdown that started with the introduction of the LVR speed limits in late 2013. The rest of the main centres have been increasing steadily since 2010 but at a very modest pace of between 1% and 5% annually.

There are unique things about Auckland that set it apart from the rest of the country. Strong net migration, consumer confidence and low interest rates are fuelling demand, while a shortage of housing stock and a relatively low percentage of properties for sale are holding back supply. High demand plus low supply equals rising prices.

For values to stop rising in Auckland we need a few things to change.

Interest rates would need to rise but that now looks increasingly unlikely this year. Not only is the Official Cash Rate likely to remain static but there is currently active competition amongst the banks to attract mortgage customers using attractive rates and incentives.

Net migration would need to slow down, in particular for the Australian economy to attract and hold more kiwis. This would reverse the current trend where fewer of us are moving to Australia, and more are returning. There is also a degree of other migrant activity in the Auckland market, for example Chinese investors.

Finally, and most crucially, we need more housing supply, in places where people want it. While building consents were up in 2014 compared to 2013, they are still well under long term average. Auckland is suffering from a shortage of skilled building labour, competing with the Christchurch rebuild and the impact of losing numbers across the Tasman post-GFC. This shortage puts developers and building firms under pressure and can impact project delivery.

Expect to see Auckland values rise throughout this year, but don’t expect the rest of the country to follow any time soon.