House buying surges

Fairfax Media

BAD NEWS FOR SOME: Home buyers who thought the property market was finally tipping in their favour could be in for a shock.

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There has been a big surge in buying activity in the housing market in the past month, though the real estate industry is warning that one month does not make a trend.

The Real Estate Institute of New Zealand said today that 5228 houses changed hands, a big recovery from January's record low of 3706.

Prices were better too - with the median price achieved up $5000 at $330,000.

REINZ president Mike Elford said there had been a significant turn around in inquiry levels. Median prices were up in all but three of the 12 regions compared with January's figures.

"January was an exceptionally bleak month and there is no doubt the figures were affected by the holiday period," he said.

"While we must still take a cautious approach, the February figures seem to indicate that lower interest rates and real estate as an investment option are having a positive impact on the market."

Though the latest figures show a big recovery from January's massive slump, the February sales were still below those of February 2008, which were 6356. And two years ago the figure was 9357. During the housing boom in the middle of the decade sales often breached the 10,000 mark.

Another cautionary note in today's figures was provided by the key, days-to-sell figure. The national median actually rose in February to a period of 62 days to sell a house, compared with 59 in January.

"The bounce back from the horrific January figures is welcome, but we must still acknowledge we’re dealing with light volumes compared with recent years," Mr Elford said.

"February figures are certainly an improvement on January. However, there is no doubt these are difficult times, so we must be cautious in our optimism. One month’s results do not form a trend."

ASB economist Jane Turner backed up those comments. "While large declines in the mortgage rate have prevented housing demand falling further, the level of house sales remains weak," she said.

"Potential house-hunters are either waiting for house prices to fall further, or feeling cautious due to economic uncertainties. Higher deposit requirements are another hurdle for first home buyers."

The median price as measured by REINZ in February was just 2.2 per cent lower than for the same month a year earlier. However, economists have placed greater weight on the figures by QV - which measures sales after full completion as opposed to REINZ's measurement of a sale as it is reported by an agent.

"Median house prices are not the best measure of house prices over time, as it is not adjusted for changes in the composition of sales," ASB's Turner said.

"However, QV housing data is adjusted and shows that house prices are down 8.9 per cent for the three months to February compared to year-ago levels."

The latest housing figures are not expected to make much difference to Reserve Bank Governor Alan Bollard's decision on interest rates, with his next announcement out tomorrow.

Official rates are currently 3.5 per cent, down from 8.25 per cent last July. Economists are split on their views of what Bollard will decide. Most expect a reduction of somewhere between half and one percentage point.

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