Significant slowdown in Auckland housing market

Real estate firm Barfoot and Thompson said yesterday, that average house prices were up 12% during 2007, from $480,738 to $538,478.

However sales volumes are down 36.3% on a annual, seasonally adjusted basis and down 17.6% month-on-month, sharebroker Goldman Sachs JB Were (GSJBW) says.

Adding to the gloomy picture inventory levels, that is the number of houses for sale are up from 6.2 months supply to 6.4 months. "The rapid accumulation of inventory from around four months' supply in March 2007 to 6.4 months in December suggests that current prices remain too high to clear the volume of unsold homes.

The pressure on house prices is to the downside to restore some semblance of affordability in the market."

GSJBW says "December house sales were down sharply, but large seasonal variations can sometimes be overcompensated in the seasonal adjustment process. Nevertheless the evidence of a sharp slowdown in the housing market is inescapable; December house sales volumes (unadjusted) were down 36.6% year-on-year"

It says the slowdown in house sales has been across all price categories, although the sharpest slowing has been in the sub $500,000 category. "While some of the decline in sales volumes in this category has been due to category shifting (as prices have increased), we believe the underlying cause for the housing slowdown is high mortgage rates, slowing net migration and a generally slowing economy."

GSJBW says the Barfoot data is a good indicator of what is happening in the market and that a fuller picture will emerge next year when the Real Estate Institute release its latest data.