Property market weaken as house prices fall

Tuesday 15th June 2010

Residential real estate sales were almost unchanged last month as the housing market stayed in a holding pattern ahead of tax changes announced in May and last week’s interest rate hike, according to the latest Real Estate Institute.

Total residential sales were flat at 5,206, compared with 5,207 a month earlier.

The volume of sales was more than a 1,000 fewer than the same month a year ago, and the market has struggled to regain the momentum of 2007, in spite of record-low interest rates.

“House sales remained at very weak levels in May, and are now down 17% on year-ago levels,” ASB economist Jane Turner says. “Budget uncertainty and looming interest rate increases were likely weighing on housing market sentiment throughout May.”

The property market fell into a lull this year after the government flagged it would tighten loopholes around property investment tax, and the central bank got closer to hiking interest rates.

Property values registered their first decline this year last month, according to QV data, after clawing back much of their losses last year amid an inflow of new migrants and returning expatriates, stoking demand for housing.

The government’s tax changes didn’t go as far as some residential property investors feared, with much of the added burden falling on commercial real estate owners. Central bank governor Alan Bollard, who last week hiked the official cash rate a quarter-point to 2.75%, indicated it would be a gradual return to normal monetary policy settings.

Turner expects to see more houses come to market as more New Zealanders shift across the Tasman.

“Along with the tax policy changes, rising interest rates and slowing net migration are also likely to reduce demand for housing. As a result, we expect the housing market to remain in favour of buyers over the second half of this year,” she said.

REINZ president Peter McDonald said with greater certainty now about tax and interest rates, “property investors are already talking about returning to the market to cater for the growing demand for domestic rentals.”

The median sale price dropped 1.7% to $350,000 month-on-month, and was up 3.7% from May 2009.

The institute’s housing price index, which was constructed with the help of the Reserve Bank to give a more accurate gauge of house prices, fell 1.4% to 3210 in May, though it rose 0.7% in the three months through May and gained 2.3% from the same month a year ago.

The number of median days to sell rose to 43 from 40 in April, and was up from 42 days in May last year.

The Auckland median price fell to $455,000 from $470,000 in April, though the number of sales increased to 1,887 from 1,768 month-on-month.

The Wellington median sale price declined to $385,000 from $390,000, with sales down to 548 from 623 in April.

The median sale price in Christchurch dropped to $277,500 from $304,775 in April, with sales falling to 492 from 511.

The Dunedin median price decreased to $241,250 in May from $248,000, and sales dropped to 154 from 175.

(BusinessWire) 11:01:39

Businesswire.co.nz

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