House values rose 2.8% last year after they hit a bottom in April, and steadily improved from there, according to QV Valuations.
By Paul McBeth
The State-owned property valuer said house values are now only 4.9% below their peak in late 2007. The average sales price rose to $404,671 in December from $393,373 a month earlier.
"2009 did not bring the continued correction to property values that many were expecting, but housing affordability did improve for a short time while values had dropped and interest rates reached their low," said spokeswoman Glenda Whitehead.
"The improvement in market conditions is on the back of lower interest rates, improved consumer confidence, an improving employment situation and no doubt the old Kiwi adage that residential property is a good long-term investment, as it is better understood by many than the alternative investment products."
The revival in the property market came after house values dropped 9.6% in April from the market peak, and helped underpin the recovery in the economy, which dragged itself out of its deepest recession since 1991 in the second quarter of last year.
The resurgence has seen the central bank bring forward the expected timing of its hikes to the official cash rate to the middle of this year rather than the second half. Auckland house prices reached a two-year high last month, according to the city's largest real estate agency Barfoot & Thompson.
Whitehead isn't convinced the property market is set for a new boom, saying "the market continued to be subdued" with a low number of listings in the main centres.
"The volume of house sales during 2009 was still at similar levels to when the market was last stagnant in 1998 to 2001 period, and in 2009 were only around two thirds of the levels seen during the boom," she said.
Whitehead expects sales activity to pick up in the first few months this year, with values to "increase slightly through 2010, but not at the same rate as we have seen in recent months." QV is unsure whether a current listing shortage was driving up house values, or if there was an underlying shortage of houses in the major centres to meet the increased demand from returning expatriates and new migrants.
"If the rebound in values were to continue at the present rate we will all too quickly regain ground lost since the peak in 2007, when the market was considered overpriced and highly unaffordable," she said.
In Auckland, property values increased 5.1% in a rolling three-month period ending December 31 from 3.1% in November, while the average sale price rose to $535,197 from $519,051.
In Wellington, values increased 4.6% in the rolling three month period, from a 2.9% annual gain reported in November. The average sale price gained to $448,652 from $438,584.
Christchurch property values rose 4.6% from a 2.6% gain, with the average sale price rising to $371,034 from $357,801.