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Housing Market Still Down In The Dumps - Anz

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Fuseworks Media
Fuseworks Media

Data Summary - august REINZ Housing Market Data

House sales (s.a.): -3.3%m/m, -27.1%y/y (-0.1%m/m -26.7%y/y last)

Median days to sell (s.a.) 43 (44 last)

REINZ HPI (s.a.): -0.1%m, +0.9%y/y (-1.0%m/m +1.9%y/y last)

Comment and Assessment

Today's housing market data showed that housing market activity remains weak. We had expected volumes to tick up but this did not eventuate. Sales volumes are considerably below year-earlier levels and are low in relation to the dwelling stock. Ordinarily, the low sales volumes would point to ongoing weakness in residential construction activity. Consent issuance of late has been trending up, with households appearing to be taking advantage of greater availability of builders to commence work prior to the October increase in GST. The 10 percent increase in residential work put in place volumes for the June quarter suggests construction activity will make a more positive contribution to growth over 2010 than what were expecting.

The low number of sales suggests there is not a lot of optimism currently in the housing market. The June and July hikes by the RBNZ would be one factor encouraging increasing caution by buyers. With the RBNZ expected to remain on the sidelines for the next few months, the market might receive some support. The flattening in the mortgage interest rate curve in recent months may also entice more buyers into the market. Given the low numbers of sales, this cannot come too soon.

Following the July fall, prices eased by 0.1 percent in seasonally adjusted terms in August. The volatility in prices and the ticking down in the August medium days to sell may partly be a consequence of the low volume of sales and we will continue to watch prices closely in the coming months. The trend in prices remains down, with prices in the 3 months to August, 0.3 percent lower than the 3-month average to May.

While the median days to sell ticked down to a seasonally adjusted 43 days, it remains considerably above the mid 30s range that was apparent at the end of last year and at the start of 2010. This is likely to continue to provide further downward pressure to house prices.

Earthquake impacts are likely to significantly impact future monthly readings from the REINZ survey. We are expecting a sharp fall in monthly sales for September, with the Canterbury market likely to be in limbo. This will make it very difficult for the RBNZ to make sense of the next few monthly readings.

Nevertheless, today's report is consistent with the spirit of the RBNZ's July OCR review, which highlighted the caution of the household sector. We await Thursday's MPS with considerable interest.

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