Property market slip or blip?

REINZ president Murray Cleland today reported a fall in the latest national median price from May’s milestone figure of $350,000 to $347,500 in June, but based on figures clouded by a change in members’ reporting systems to the institute.

The institute has tightened the reporting deadline for sales from June, so an earlier cut-off point has reduced June reported sales by around 600 or 8%, which may have affected some median prices.

But Cleland says there’s no doubt the market was easing back from the frantic pace of the first five months of 2007. He says 7,474 sales were recorded in June; a big drop on the strong May figures of 9,285.

However, taking into account the changed reporting system, actual June figures were likely to be around 8,000 sales, which was very comparable with June 2006 sales of 8,428 and June 2005 sales of 8,025.

“The other factor is that we are now well into winter and that has a heavy influence on people’s inclination to transact property. So how much of the decline in June is due to seasonal factors, and how much the Reserve Bank can take credit for with its OCR increases, are key questions.”

Carey Smith, New Zealand chief executive for Ray White says June and July are the two quietest months of the year, “so it’s hard to read much into the ‘softening’”. He says however that the investment side of the market – meaning properties under $300,000 in the main CBDs – has quietened: from 26% to 21% of the month’s sales.

Smith says the market is still “stable” as between buyers and sellers, and that Ray White’s “list-to-sell” ratio (meaning the number of properties listed that sell within that month) has not altered, at 86%. This means, says Smith, that less properties are coming on the market – so there are less to sell, which means a drop in sales figures.

Ashley Church, CEO of the Auckland Property Investors’ Association says while the June figures are interesting, he would not necessarily read a trend into them yet. Church would want to see several months of such results “end on end” before concluding a downturn has arrived.

And such a market downturn, says Church, will present an opportunity for rent levels to catch up to property prices, meaning improved yields for investors.

The days to sell figure was unchanged at 30 days nationally and there was very little change in the days to sell figures in the major metropolitan areas, with Auckland steady at 28 days, Wellington down from 27 in May to 26 in June and Canterbury/Westland down from 27 to 26 also.

“These indicators suggest the housing shortage remains as the main dynamic in the residential property market with too many buyers chasing too few houses,” Cleland says.

On balance Cleland felt prices were easing partly through seasonal factors and partly because of higher mortgage interest rates, but that underlying any weakness was the reality that the country was short of housing, especially at the affordable end of the market.

Main urban areas commentary