House sales down 23% in June from year ago, Barfoots reports

Auckland's largest real estate agency group, Barfoot and Thompson, has reported house sales volumes fell to 665 and the average price fell to NZ$523,058 in June as uncertainty after the budget and the usual winter slowdown hit volumes.

(Updated with comments from ASB economist Jane Turner about a 15% seasonally adjusted fall in volumes and her outlook for falling house prices)

Volumes were down 23% from 861 in June a year ago and down 16% from May, while the average price was down 3.6% from May and up 0.25% from June a year ago.

The Barfoot and Thompson figures for New Zealand's largest real estate market are the earliest indication of how the market went in June. The next most up to date indications nationally will come from the Real Estate Institute of New Zealand and Quoteable Value.

"While the budget has definitely contributed to lower sales, its impact on prices has not been great, and there is no indication that investors are getting out of the market," said Barfoot and Thompson Chief Executive Wendy Alexander.

“Factors that confirm this are the average price in June is the same as that for June last year, while the number of new listings, at 1194 for the month, is down 12.8% on those for May and the same as for June last year," Alexander said.

“If investors were getting out, listings would be up and prices would be under more pressure than they are. It adds up to a market that is uncertain, and many people are putting off making decisions."

Alexander said the average house price had moved in a band between NZ$505,000 and NZ$545,000 since the start of the year.

"It is unlikely there will be any significant changes in the ‘steady as she goes’ state of the market before the return of the warmer weather in September," she said.

Barfoot & Thompson said it had 5,794 properties on its books at the beginning of July, 229 fewer than on June 1 and 237 more than on July 1, 2009.

Rents rise

Barfoot and Thompson said the average weekly rent had increased NZ$5 to NZ$403 in June from May, which it said was the highest weekly average for eight months and up NZ$15 from the same time a year ago. “Rents are edging up at a time of the year when they tend to trend downwards,” said Alexander.

“Landlords are anticipating they will be facing higher costs, and they are looking to recover some of those increases through higher rents," she said. “At this time last year the average weekly rent was NZ$15 lower.”

Barfoot & Thompson said it rented out 690 properties in June, up 6.3% from May.

ASB economist Jane Turner said the figures showed a 15% fall in seasonally adjusted Auckland house sales in June and a 5% fall in seasonally adjusted listings. She also noted the slight increase in rents.

"Recent anecdotes suggest landlords intend to increase rents in reaction to tax changes in Budget 2010. However, the ability to increase rents may be limited by prospective tenants’ ability to pay given the weakness in wage growth over the past year," she said.

"Housing market activity is likely to remain very weak throughout the remainder of 2010, reflecting waning demand. Tax changes around depreciation rules have reduced the attractiveness of holding investment property at the margin. In addition, slowing net migration and rising interest rates will also reduce support for housing demand over the year," Turner said.

"Given the weakening fundamentals we expect to see house prices decline slightly this year. However, the low level of supply, as indicated by weak consent issuance and the low level of new listings, will limit the degree of downside pressure on house prices."