New Zealand's real estate market experienced a significant drop in sales last month, and sales volume over the past six months is down almost a third. Buying sentiment has been put off by higher fixed mortgage rates, along with the prospect of unfavorable changes in property tax law, dampening the outlook for 2010. See the following from Property Wire for more on this.
A worrying slowdown in the real estate market in New Zealand could indicate that the economy is struggling to maintain momentum, it is claimed.
The volume of properties sold in New Zealand fell 17% last month compared with January 2009, according to house sale data posted on the Real Estate Institute’s website which were then removed as they had been published ‘in error’ a day too early. But it didn’t stop commentators analyzing them.
The median price also fell $10,000 to $350,000 over the same period, while median days to sell remained constant at 36 days. The figures indicate that the housing market is running out of steam, analysts say.
‘It highlights the fragile nature of the recovery to date. As a good gauge of domestic demand, the weak housing turnover raises concerns over the sustainability of the recovery to date and emphasizes to us that monetary policy support will not be removed before June at the earliest,’ said Goldman Sachs JB Were economist Philip Borkin.
Sales volumes have fallen over 31% over the past six months, close to the depressed lows of 2008, the figures show. The drop in turnover suggests the possibility of the economy experiencing another dip over 2010, said Borkin.
‘While there is some merit in the view that the housing market is still being held back by a lack of quality properties listed for sale, we suspect that increases in fixed mortgage rates over the past few months has dented optimism,’ he explained.
‘Nevertheless, on the back of these numbers, we would expect to see house price growth ease over the coming months,’ he added.
Westpac Bank senior economist Donna Purdue said the bigger influence on January’s house sale figures was a concern over potential changes to the tax treatment of housing. Although the introduction of a capital gains or land tax has been ruled out, changes to the tax treatment regarding depreciation will make property investment less attractive, Purdue said.
‘The volume of sales is very similar to the lows we saw in 2008. This is deeply worrying. There is suddenly a flood of unsold homes. Total listings of homes for sale were up 12% in January and combined with a plunge in sales, this means there is now 12 months’ worth of homes for sale, up from nine months’ in December,’ said Shamubeel Eaqub, economist at NZIER.
‘The cheapest mortgage rate in January was 5.9% compared to 5.5% in September 2009. Renewed weakness in the housing market, combined with regulation uncertainty until the May 20 Budget means the outlook for the housing market is jaundiced in the first half of 2010,’ he explained
The housing market is a very good barometer of the economy. The latest data suggests the economic recovery is less than certain. With so much uncertainty on housing, the Reserve Bank is hardly pressed to increase interest rates,' he added.
Last week the latest listing figures from realestate.co.nz showed that fewer new properties are coming onto the market, sales are subdued and while figures show year on year growth they are still lagging behind historical averages.
Total real estate sales for 2009 were just 69,000, up from the 2008 level of 56,000, but far from levels of around 100,000 seen in 2007. Last month saw just under 10,000 new listings coming onto the market, the first time in four years that the January figure has been lower than December.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.