House sales hit a new low in January; prices slide

The Real Estate Institute says only 3,252 houses changed hands in January, beating the previous record low of 3,666 in January last year.

Institute chief executive Helen O'Sullivan says this reflects that, with rental shortages in key urban areas such as Auckland and relatively low interest rates, home owners and investors alike are under no pressure to sell.

Sales volumes were down on January last year in all 12 regions the institute divides the country into.

The national median house price fell to $340,000 in January from $352,000 in December and was down 2.9% on January last year's median of $350,000. Of the houses sold, 2,028 were priced below $400,000 and only 73 were priced above $1 million.

The institute's index, which irons out distortions caused by fewer or more higher or lower priced properties selling in any one month, fell 2.6% in January from December and was down the same amount, 2.6%, on January last year. The index is now 7.7% below its November 2007 peak.

The number of days it took to sell a house in January jumped sharply to 51 days from 39 in December and 43 in January last year. The long-run average is about 40 days.

Annette Beacher at TD Securities says on top of poor consents to build new houses, the figures show higher interest rates aren't needed and, if anything, lower rates may be needed.

"The interest rate-sensitive sectors of the economy have clearly flat-lined," Beacher says.

Chris Tennent-Brown, Commonwealth Bank of Australia's New Zealand economist says volumes were even weaker than his low expectations but because the housing market is typically quiet in December and January that makes interpreting the data difficult.

However, "this does not bode well for activity as we now enter the busier months for the housing market."

He expects households to remain cautious and housing sales volumes to remain low over the coming months. He expects prices to remain soft, down about 5% or 6% on the 2007 peak.

Tennent-Brown is still picking the next move in interest rates will be up and expects the Reserve Bank to start hiking its official cash rate gradually from September.

"The weakness in the housing market and the lack of traction low interest rates are having on the broader economy at present reinforces the need to keep interest rates low for the foreseeable future."

Around the country, using the institute's index, house prices in Christchurch were down 5.9% on January last year , Wellington's were down 5.9% and Auckland's were down 2.3%.

Prices in other North Island suburbs were down 3.1% while they were down 3.9% in other South Island suburbs compared with a year earlier.