Barfoot & Thompson, Auckland's largest real estate agency group, says house prices fell in the City of Sails in May versus both April and May last year as sales volumes increased demonstrating that prices are not starting to overheat.
The real estate agency said May's average price of NZ$529, 284 was down NZ$15,691, or 2.8%, on April’s NZ$544,975 average price and 2.5% below the May 2010 average.
"It reverses a three-month trend where the average price for the month was higher than that for the preceding month," said Peter Thompson, Barfoot & Thompson's managing director.
The company sold 889 properties in May, up 166, or about 23%, from the 723 sold in April, and 12% more than the 792 sold in May 2010.
"This combination of rising sales and the average price easing demonstrates that prices are not starting to overheat," said Thompson.
"The major issue facing the Auckland market remains lack of choice for buyers."
He said Barfoot & Thompson listed 1169 new properties during May. Although up 13% on April's new listings, it was 15% below new listings in May last year.
"At the end of May we had only 5249 properties on our books, the lowest number for 20 months," Thompson added.
Meanwhile, he said a contributing factor to the drop in the average sales price was the relatively low number of million dollar plus property sales that settled during May.
"In any given month 15% to 16% of our sales by volume would be valued in excess of a million dollars, but in May that number eased to 13.6%," said Thompson.
"Again it is lack of choice that is affecting this market segment as there are active buyers looking in this price bracket."
"Given the natural level of home turnover in a city the size of Auckland, it indicates that many home owners who are thinking of selling have adopted a wait and see policy until there are stronger signs that the economy is on the path to recovery."
He said there was a good level of buyer interest meaning people pricing their property at the right level were achieving sales.
'Household sector gradually starting to recover'
ASB economist Jane Turner said Auckland housing market activity has lifted from late last year, with sales up 32% on the weakest period. However, so far this lift in activity appeared fairly localised to Auckland, with nationwide activity still subdued.
"Nonetheless, the Barfoot & Thompson data highlight that housing supply in Auckland is becoming tight (particularly after a few years of low construction activity), and supports our view of rising house prices over the coming year," said Turner.
The bank's economists expect house prices to rise 3% over the coming year.
She added that the lift in Auckland housing market activity suggests confidence in the household sector is gradually starting to recover.
"Combined with the lift in business confidence over April and May, the Reserve Bank will take this as an encouraging sign that lower interest rates are helping to stimulate activity," Turner said. "However, the Reserve Bank will want to see a pick up in demand that is more widespread across the economy."
ASB economists still expect the central bank to leave the Official Cash Rate at 2.5% for the remainder of 2011, Turner said, adding that it will want to see evidence the New Zealand economic recovery has gained a firmer footing.
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(Updated with comments from ASB economist Jane Turner).