Signs housing market slowing

Jenny Ruth

Thursday 19th February 2004

Prices of existing houses showed further weakness in January, but that reflects more sales of lower valued properties and a marked slowdown in sales of higher valued properties.

The latest Real Institute figures show the median house price fell to $227,750 in January compared with $229,000 in December and November's record $235,000.

Real Estate Institute president Graeme Woodley says the number of property sales worth more than $600,000 fell from 507 in December to 270 in January while sales between $400,000 and $600,000 fell from 957 to 631. By contrast, sales under $400,000 rose to 7,258 in January from 7,239 in December.

Woodley says it's too early to reach any conclusions about the trend for the rest of 2004, but many commentators are predicting a slowdown in the rate of house price increases in the face of falling migration and rising interest rates. "The predictions themselves may have affected buyer confidence."

Another sign some of the heat may be going out of the market is that the number of days it took to sell a house rose from just 23 in December to 32 in January, although that was still below the 38 days it took in January 2003.

"What this tells us is that buyers and sellers are simply taking more time to make decisions rather than withdrawing from the market altogether. The volumes are still strong; it's just that people are being more considered, which is not a bad thing at all," Woodley says.

The total number of houses sold in January fell to 8,404 from 8,703 in December but was still ahead of the 8,159 sold in January last year.

Darren Gibbs, senior economist at Deutsche Bank, says that, allowing for seasonal effects, this was the fourth consecutive monthly decline which suggests the market may have peaked late last year.

Nevertheless, the market is still very strong. "Total sales remained 5.6% higher than a year earlier and, more significantly, 43% above the average turnover since January 1990." The market can still be described as "very buoyant," he says.

In the regions, prices rose in four and fell in six compared with December with Southland unchanged. Compared with January last year, prices rose in all regions except Southland which fell from $111,000 to $110,000.

Activity was up in four of the regions and down in the other seven compared with December and up in seven regions and down in the other four compared with January last year.

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