Mixed messages from the housing market

Jenny Ruth

Thursday 20th May 2004

The latest housing market statistics show a somewhat contradictory picture of house prices hitting new records at while the number of sales fell sharply and the number of days it takes to sell a house increasing.

Real Estate Institute figures show the national median house price rose 0.6% from $240,500 in March to $242,000 in April which was 19.2% higher than the $203,000 recorded in April last year.

The largest annual increase was 48.8% in Otago followed by Southland's 43.8% rise and Napier's 34.2% gain. The smallest annual increase of 6.3% was recorded in Waikato/Bay of Plenty/Gisborne.

However, the number of houses sold fell 15.6% from 11,371 in March to 9,594 in April, although that was up on the 9,047 sold in April last year. The number of days it took to sell a house rose from 27 in March to 29 in April which was the same as in April last year.

Although he describes the latest figures as "hard to take a reading off," institute president Graeme Woodley says they don't prove a slowdown is in progress.

"While some commentators are saying that the housing market is running out of steam, the latest figures don't currently provide the evidence to support their claims," Woodley says.

Deutsche Bank chief economist Ulf Schoefisch says the volume of sales is now 22% down on the cyclical peak reached in September.

The figures suggest the slowdown is affecting lower-priced homes more. The number of sales in the under $400,000 bracket fell 16.4% in April from March while sales in the $400,001 to $600,000 bracket fell 10.9% and those above $600,000 were down 14.7%. That suggests sales of more expensive houses boosted the national median price.

Schoefisch says adjusting for these factors, he estimates house price inflation has slowed to about 2% a quarter from 7.3% in the September quarter last year and 4.9% in the December quarter.

With economists forecasting that the Reserve Bank's official cash rate will rise from its current 5.5% to 6% or more, which will push up floating mortgage rates to 8% or more, Woodley says he expects to see further declines in sales volumes in coming months.

"What we don't expect to see is any erosion in current property values. The price of most properties will continue to increase, although not to the extent seen over the last 12 months," Woodley says.

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