If the number of houses being listed for sale doesn't increase, the inevitable house price rises that follow will risk the market stalling with buying moving out of reach for many people, Alistair Helm CEO of Realestate.co.nz is warning.
Realestate.co.nz's latest monthly property report, for March, shows the stock of unsold houses on the market dropped to its lowest point since January 2008, with 46,411 unsold houses, apartments and lifestyle properties on the market at the end of March, down 619 from 47,030 at the end of February on a seasonally adjusted basis. Nationwide inventory - measured as the number of weeks of sales in seasonally adjusted terms - dropping to 32.4 weeks supply from 46.7 weeks a year ago.
Helm says the next three months will be crucial given property sales traditionally remain strong through autumn.
"Without the ability of the market to be re-supplied with new listings the outcome could be further rises in asking price and sale price or more significantly a stalling of the market as buyers become wary of a market getting out of reach of the majority of buyers," says Helm.
New record high asking price
The report shows 13,265 new listings came to market in March, down 194, or 1%, from February's 13,459, but up 1,018, or 8% compared with March 2011. The seasonally adjusted mean national asking price rose NZ$3,300, or 1%, from February to a new record high of NZ$429,865.
Just three regions - Gisborne, Wairarapa and Otago - have inventory levels above the long-term average giving buyers the advantage, Helm says.
"Contrast this with the same view of the market 12 months ago and there was not one region where inventory was at or below the long-term average (of 41 weeks)."
He says the message coming from the property market is that buyers are out there, and keen to get into the market whether they be first time buyers, mid life stage buyers or investors.
"Their eagerness to buy matched to availability of attractive financial support is however not being met with a consistent and sufficient supply of new listings. This scenario continues to drive this sellers' market, where it is clear those homeowners who are putting their property on the market are expecting to see a higher sale price as flagged by this new record level of asking price in March," says Helm.
The "attractive financial support" comment comes with three of the big five banks - ASB, BNZ and Westpac - having recently been growing their home loans with loan to valuation ratios as high as 95%, something that has come under fire from ANZ CEO David Hisco.
New highs for asking prices in Canterbury & the Waikato
The market stalling warning from Realestate.co.nz, the official website of the New Zealand real estate industry, comes with the latest sales figures from the Real Estate Institute of New Zealand showing 6,168 house sales in February, up 51% from January and up 37% from February 2011. It was the strongest February for sales since February 2008, when house prices peaked nationally.
Helm says features in March included new record high asking price expectations in Canterbury - topping the previous record set in February - and the Waikato, above the previous record set there in December 2007. The Canterbury price rose 2% to NZ$383,395, and the Waikato price 5% to NZ$380,315. See more on Canterbury in Alex Tarrant's story here.
In Auckland the mean asking price rose 1% to NZ$559,369, new listings fell 3% to 4,375 and inventory dropped 10% to just 21.7 weeks. According to government valuer Quotable Value, house values in Auckland are now above the previous (2007) market peak by 2.3%.
ASB economist Jane Turner's views
ASB Economist Jane Turner notes that although new property listings increased slightly in March, they remain very low. Based on ASB seasonally adjusted estimates, Auckland new listings remained broadly flat while Canterbury new listings ticked up.
"Nationwide total house listings (seasonally adjusted) continued to decline, despite the small increase in new listings," says Turner. "This suggests housing market activity remained firm over March, and demand continues to outstrip supply. The number of weeks of inventory (based of recent sales rates) measures supply relative to demand, and this also continued to fall over March."
She says the housing market has benefited from a small pick up in demand over recent months, with low interest rates and increasing household confidence contributing to the increase in activity.
"Nonetheless, the overall level of demand remains relatively subdued. Overall population growth remains weak as New Zealand continues to record net migration outflows and households are still somewhat wary about high debt levels," Turner says.
"However, very low supply of housing available for sale is placing pressure on the market, particularly in Auckland. The housing market is tipped in favour of sellers and has resulted in rising house prices over the past year. An increase in housing construction over the coming year, including rebuilding in Canterbury, should help alleviate some of the pressure on housing supply."
(Update adds comments from ASB's Jane Turner).