Earthquake adds to housing market woes - ANZ

"We had been detecting an improvement in anecdotes across the country, though the housing market was a laggard," ANZ said.

"Momentum was building and things were shaping up nicely for 2011. But February's destructive earthquake has seen us slash our projections for 2011 and beyond."

The bank said previously it had factored in a strong earthquake rebuilding effort from the September quake, but that work is set to be delayed.

"We still expect a boost to activity from the rebuild and repairs, but it will come later. Household balance sheets will also be weaker as property values around Christchurch will have taken another hit."

This snuffing out of a flickering turnaround has also been reflected in the ANZ Property Gauges, 10 gauges the bank uses to assess the state of the market and look for signs of emerging trends.

Of the 10 gauges, only two showed a moderately positive direction for house prices.

Consents and house sales and supply-demand balance both pointed to house prices either rising or remaining at their current level.

Of the remaining eight gauges the majority, six, were in neutral territory and two pointed to house price falls.

Among the neutral gauges interest rates had showed virtually no change over the past month, mortgagee sales remained high and affordability remained unchanged from September and December, though ANZ described the 12-month trend as encouraging.

Serviceability/indebtedness and liquidity pointed to house price falls as the ratio of debt to income is at a five-year low, and dropping.

"With most of the series showing little change over the end of last year, the focus was turning to how 2011 will shape up. But that was last week's news and the earthquake has turned everything on its head," ANZ said.

"The devastation and rebuild from the quake will be felt for years to come, in some form or another."