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Auckland property market starts to outperform

Monday 14th March 2011

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There are tentative signs that the Auckland housing market is outperforming because of population pressures, economists said after the release of the latest Real Estate Institute of New Zealand survey.

The national housing market staged a modest recovery in February compared to January but volumes were halved in earthquake-hit Canterbury, REINZ said. The national median price of $350,000 was unchanged from February last year but was up $10,000 on January. A total of 4502 unconditional sales were reported, up 38% on January and up 45% when the Canterbury/Westland region was excluded. But the number of properties sold is down 4.3% on February last year.

Goldman Sachs & Partners economist Philip Borkin said the disruption from the February 22 earthquake in Christchurch would be more enduring than the September earthquake last year and regions around the country may benefit from Canterbury emigration.

"To be fair, we are not yet becoming housing market bulls and continue to see median house prices remaining under modest downward pressure until the second half of 2011. However, we are starting to see the beginnings of a possibly better backdrop for the nationwide housing market," Borkin said.

ASB said the average days to sell a house had increased to 48 days, which was the longest since March 2009.

There were signs that investors were returning to the Auckland market because of increasing rental returns.

"This is consistent with other anecdotes and reports of a relatively tight rental market in Auckland at present. However, this investor interest does not seem to be spurring an overall pick-up in activity. Auckland's days to sell lengthened significantly over the month, but nonetheless remain below the nationwide median," ASB said

REINZ chief executive Helen O'Sullivan said that a recovery in transaction volumes in Auckland in February was encouraging and Auckland's transaction volumes were marginally higher - by just one transaction - than in February 2009.

"Reports from members indicate that although rents are rising in key urban areas and there is a continuing shortage of housing stock, particularly in Auckland, buyers are still being cautious," the report said.

O'Sullivan said that the recent cut in the official cash rate by the Reserve Bank of 50 basis points may provide some encouragement to buyers.

The Canterbury earthquake in the last week of February has had an impact on the volumes for that area and on the national total, so caution was required in analysing the data, REINZ said.

Some sales reported as going unconditional in February may not complete if there has been substantial property damage and future sales are likely to be conditional on structural and geotechnical assessments, which will take time to complete.

Inability to procure insurance cover was currently the single biggest impediment to transactions in Canterbury.



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