REINZ says expected spring lift in property market "muted"; Oct sales down 4% from Sept, but up 28% from yr ago; Median price up 2.6% to NZ$359K

The widely expected spring 'lift' in the property market appears to have been muted as buyers are still very price conscious, the Real Estate Institute of New Zealand (REINZ) says.

The REINZ reported 5,007 unconditional house sales in October, down 4.4% from September, but up 28.3% from October 2010. Seasonally adjusted figures showed a 0.5% drop in sales in October from September, the REINZ said.

An analysis sent out by ASB economists showed a seasonally adjusted fall in house sales in October from September of 3.7%, led by a 9.2% fall in Canterbury sales (see ASB's full comment below). ASB economist Christina Leung said the October figures showed a continued slowing in nationwide housing market activity, adding to recent data which indicated there was little need for the Reserve Bank of New Zealand to raise the Official Cash Rate until June 2012.

The national median house price rose by NZ$9,000 (2.6%) to NZ$359,000 from both September this year and October 2010, REINZ said.

The REINZ housing price index, which was devised with help from the Reserve Bank of New Zealand, fell 0.3% in October from September. The index was up 3.4% from October 2010 and 3.3% below its November 2007 peak.

'Expected lift muted'

“The volume figures for October suggests that the spring ‘lift’ widely expected in the real estate market has been muted, but so too has any impact from the Rugby World Cup and European uncertainty,” REINZ Chief Executive Helen O’Sullivan said.

“Volumes are up strongly compared to this time last year, but that in part reflects a very weak October 2010 when sales volumes were amongst the lowest in the past 20 years,” O'Sullivan said. 

“We are seeing plenty of activity, but buyers are still very price conscious.  They will move quickly when they find a property that meets their needs, but properties perceived by prospective buyers as over priced are not generating much interest at all,” she said.

Only four markets showed an increase in sales volumes during October, with Taranaki, Wellington, Nelson/Marlborough and Southland all reporting increases, REINZ said in its October report.

"Taranaki recorded the strongest lift in volumes at 15.5%, followed by Wellington (+7.6%) and Southland (+2.4%).  Northland reported the largest drop in volumes compared to September (-28.7%) although this was after a strong lift in volumes in the previous month.  Interestingly volumes in the Auckland market fell by 4.7% whereas the normal seasonal pattern would have predicted a modest increase compared to September," REINZ said.

"Southland recorded the strongest lift in prices for the month of October (+19.3%), followed by Taranaki (+11.1%) and Central Otago Lakes (+9.1%).  Compared to October 2010, Southland also recorded the strongest lift in prices (+20.4%), followed by Central Otago Lakes (+9.1%) and Nelson/Marlborough (+7.3%)," it said.

Days to sell falls

"The national median ‘days to sell’ improved by 2 days from 37 days in September to 35 days in October.  The days to sell were at 41 days in October 2010.  The days to sell measure continues to trend downward and has now fallen by 10 days over the past five months, from 45 days in May to 35 days in October," REINZ said.

"Otago recorded the shortest days to sell at 30 days (-6 days), followed by Southland at 31 days (-5 days), and Canterbury/Westland next with 32 days (-6 days).  Central Otago Lakes recorded the longest number of days to sell at 57 days (-22 days), followed by Northland at 50 days (-6 days). Over the past five years the median days to sell has averaged 41 days across New Zealand," it said.

Reaction

ASB economist Christina Leung said the October house sales data showed a continued slowing in housing market activity.

"Much of the 3.7% decline in nationwide turnover, by our seasonally-adjusted estimate, was driven by a 9.2% decline in housing turnover in Canterbury," Leung said.

"Volatility in Canterbury housing turnover could be expected in light of the many disruptions in the wake of the earthquakes. Nonetheless, the results highlight the many challenges faced by the region. We expect Government and insurance payouts will support a recovery in house sales in the region as households relocate over the coming year," she said.

"While recent housing inventory data have pointed to continued supply constraints in the housing market, the slowing in activity has seen the [seasonally adjusted] median number of days taken to sell a house edge slightly higher. The small decline in house prices over October also suggest some easing in tightness in the housing market. Nonetheless, the stratified measure of prices has increased 3.4% over the past year, reflecting a recovery in house prices.

October's figures pointed to a continued slowing in the pick-up in housing market activity.

"We expect the recovery in the housing market nationwide will occur at a very gradual pace, with further house price increases likely to be modest," Leung said.

"The October REINZ result adds to recent domestic data which indicate there is little urgency for the RBNZ to raise the OCR. With the deterioration in the European debt crisis dominating the RBNZ’s attention for now, we expect the RBNZ will leave the OCR on hold until June next year," she said.

(Updates with quotes from REINZ, reaction from ASB)