Mexican stand-off in housing market

ASB Bank chief economist Nick Tuffley says “a degree of Mexican stand-off remains in the market; buyers and sellers are having difficulty meeting in the middle, so turnover continues to decline.”

REINZ data out yesterday shows that while the median price has held firm at $345,000, turnover is way down compared to this time last year.

Added to that the REINZ figures show the number of days to sell has increased to 49.
Deutsche Bank says that the days-to-sell number hasn’t been at this level since 2002 and if sales activity remains at these extremely low levels, then the days to say statistic should rise substantially.

ASB’s Tuffley says the market is splitting into different groups based around sale price.
Fewer properties in the less than $400,000 bracket are selling than previously, meanwhile sales of houses worth more than $1 million are strong.

The REINZ figures show sales are down across the board and Tuffley says that sales in the sub $400,000 market are down 61% compared to last May, however sales in the $1 million –plus market are down only 28.5%.

Deutsche Bank says the Auckland market is hardest hit, “thanks to the acute sensitivity of this market of mortgage interest rates (due to high average house prices).”

The other key trend is that stock is building up in the market. This could lead to two outcomes. The first, and there is growing evidence it is happening already, is that vendors are taking their properties off the market. Many appear to be putting them out for rent, thus increasing the pool of rental stock.

The other outcome is that prices will have to move to clear the backlog of stock for sale.

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