Cyclical recovery underway in housing market

The residential housing market has started a cyclical recovery, with rising turnover and prices, decreasing days to sell, a spike in listings shortages and the entry of first home buyers into the market, according to BNZ.

In the banks Real Estate Overview chief economist Tony Alexander said, "we anticipate improving prices and activity over the coming couple of years, however there will be restraint from easing net migration inflows over the coming year, rising interest rates, high household debt and possibly a structural lift in the savings rate, and already high house prices compared with incomes."

Around New Zealand in June there were 5,228 properties sold, a 14.3% rise on June 2010, and in the June quarter sales were 6.6% ahead of a year ago and roughly 15% ahead in seasonally adjusted terms from the March quarter.

However, while the market is picking up, "at just 56,042 the number of sales in the year to June was still extremely low by historical standards."

The BNZ report acknowledges the difficulty of gauging price movements given the available data, though it notes that during the June quarter the REINZ house sale price measure rose by 1.5%.

While the strongest quarterly gain since December 2009, prices were still 0.4% below a year earlier and 4.3% lower than the absolute peak in the three months to November 2007. Prices on average in real terms are 16% below their peak.

The report also found "no evidence of downward pressure on prices" in the wake of tax changes removing depreciation and the use of loss attributing qualifying companies to offset property losses against other income.

On average during June days to sell stood at 44 days, down by one day from June 2010 and 6.1 days longer than the average for June over the past decade. In May it took 7.9 days longer than average to sell a house, in April 7.7 days, and the June 6.1 day result was the lowest since December's 5.5 days.

"Therefore there has been a hastening of activity in the market," said the report.

In summation the report says that while the housing market is trading at low levels, "barring a new global catastrophe, it appears that New Zealand's housing market has started a cyclical upturn."