By Bernard Hickey
Property market activity appears to have slowed somewhat in June and July by more than usually happens in mid-winter as the benefits of the surprise cut in the Official Cash Rate on March 10 wore off.
Concerns through July about the prospect of the OCR rising again from September 15 appeared to weigh on the market, although that may have eased in recent days as the global market turmoil encourages economists to push back their expectations of a rate hike to December 8. Most borrowers are now on floating rates which are expected to move in lock-step with the OCR. See more here in Alex Tarrant's article.
The Real Estate Institute of New Zealand (REINZ) reported on Thursday there were 4,928 properties sold in July, which was down 5.8% or 301 from June but up from 4,411 in July a year ago.
REINZ said the median price fell 4.2% to NZ$345,000 in July from NZ$360,000 in June and was down from NZ$349,000 in July a year ago.
REINZ said the fall in July sales was a slightly larger decline in the seasonal pattern than is normal at this time of the year, although it described the fall as a "mid-winter breather."
Our interactive chart below of the REINZ stratified measure of house prices, which removes the 'skew' associated with the raw median, shows nationwide prices were down 5.1% in July from the peak in November 2007.
The REINZ figures follow Quotable Value (QV) figures for the three months to July showing values were steady overall. See more here in Monday's article.
QV's figures are issued monthly and measure movements in values compared on a 'like-for-like' basis in the three months to July. They look at prices for certain properties in certain suburbs and compare them with similar sales a year earlier.
The QV figures differ from the REINZ figures in that QV's figures look at 'like for like' values rather than raw prices in any one month.
REINZ's figures are for median prices for sales in any one month and are therefore subject to being skewed by larger numbers of sales in any one price bracket, although REINZ does issue a stratified median figure that filters out the 'skew' effect. REINZ's figures are seen as more volatile, but up to date than QV's figures.
REINZ remained upbeat about the figures.
“The July results continue the trend of prices moving sideways with volumes on an annual basis continuing to recover. The drop in volumes and the median price in July is not unexpected and reflects the fact that we are in the middle of winter”, said REINZ Spokesperson Philip Searle.
“The lack of listings and vendors in the market is continuing to be an issue for agents with more and more regions reporting shortages of new stock and a lack of choice for buyers.”
“Despite these challenges, many regions report good attendances at open homes and active buyer interest, although concerns about the economy and volatility in financial markets may be holding some buyers back at present”, said Philip Searle.
REINZ's stratified measure known as the Housing Price Index showed a 0.6% fall in prices in July from June. It showed prices up in Christchurch, Wellington and the rest of the South Island, while there were falls in Auckland and the rest of the North Island.
The sales figures showing a flat to slightly weaker market in July contrasted with the feedback from real estate agents in a REINZ-BNZ poll result released yesterday showing agents relatively confident about prices and worried about a lack of new listings. See Alex Tarrant's article on those survey results.
Most of sales fall in Auckland
The raw median figures showed the median price up in Auckland to NZ$465,000 from NZ$461,000 in June and NZ$450,000 in July a year ago. Wellington's median price fell to NZ$365,000 from NZ$380,000 in June and was down from NZ$385,000 in July a year ago.
Of the 301 fall in national sales in July from June, the bulk of that fall happened in Auckland where sales fell 297 to 1,799 from 2,096 in June. Canterbury sales rose to 639 from 511 in June and were just below the 683 recorded in July a year ago. Sales volumes in other parts of New Zealand were broadly steady.
Auckland fastest to sell though
The nationwide median days to sell fell to 42 in July from 44 in June and was down from 45 in July a year ago.
The fastest region for days to sell was Auckland on 34 in July, down from 36 in June and down from 38 in July a year ago. It is now at levels last seen in mid-2007.
Auckland's biggest real estate agency chain, Barfoot and Thompson, was responsible for 778 or 43% of total sales in July. See Gareth Vaughan's article from last week on Barfoot and Thompson's figures.
Economists comment
Westpac Economist Dominick Stephens said the housing market appeared to have absorbed the impact of last year's tax changes, which reduced the appeal of property.
"The domestic economy has been steadily gaining ground since the start of the year, and interest rates remain very supportive," Stephens said.
"We continue to expect a 4% rise in house prices this year, but rising mortgage rates are likely to keep a lid on prices next year."
JP Morgan Economist Helen Kevans said the figures showed the market appeared to be stabilising.
"We suspect, though, that house prices will rise this year (around 2%), owing mainly to persistent stock shortages," Kevans aid.
"The worsening demand-supply imbalance is putting upward pressure on house prices, which will be dampened only modestly by slower net migration inflows and expectations of higher interest rates," she said.
"But, the fact that households continue to shy away from taking on additional debt and that house prices remain high relative to incomes will limit the upside. Indeed, house prices remain elevated, despite the fact that the economy recently battled a recession that latest for five straight quarters."
ASB Economist Christina Leung said the lower number of median days to sell indicated some tightening in the housing market while house prices were broadly flat over July on a seasonally adjusted basis.
"Today’s data reflect the very gradual recovery that is occurring in the housing market," Leung said.
"It is encouraging to see housing demand recovering in Canterbury over July following the disruptions in June. Auckland is already becoming a sellers’ market as stock levels fall and buyer competition warms up. While the recovery in housing demand has been more subdued elsewhere, we expect things to pick up over the coming year," she said.
"Recent data point to an improvement in household sector conditions. However, with household debt still remaining at high levels we expect households will remain cautious. At the moment, the global outlook is dominating market attention. With global risks intensifying in recent days we now expect the RBNZ will hold off taking back the 50bp insurance cut until December this year."
See full detail on REINZ statistics for July here in this set of tables.
See REINZ's full release and regional commentary here.
See all our interactive real estate charts here.
| Region | Index level | 1 month | 3 months | 12 months | 5 years CAGR | From Nov 07 peak |
| New Zealand | 3,208.7 | -0.6% | -1.1% | 0.5% | 1.6% | -5.1% |
| Auckland | 3,467.8 | -1.6% | -2.6% | 3.5% | 2.4% | -4.6% |
| Wellington | 3,304.4 | 1.3% | -2.2% | 0.8% | 1.5% | -5.5% |
| Christchurch | 3,005.0 | 2.7% | 6.9% | 0.2% | 3.0% | -2.8% |
| Other Nth Island | 3,007.1 | -2.4% | -1.6% | -4,4% | 0.1% | -11.7% |
| Other Sth Island | 3,308.2 | 2.6% | 0.4% | 3.8% | 2.1% | -5.7% |
| Sections | 4,393.4 | -7.1% | 5.7% | -1.8% | 0.6% | -18.8% |
(Updated with details, links to previous articles, regional detail, REINZ comments, Economists comments, table, chart)
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