New Zealand recovery hit hard by earthquake
The New Zealand property market showed signs of recovery in February but it has been hit by the earthquake in Canterbury as sales dropped 4.3%, according to figures from the real estate industry.
The median price of $350,000 was unchanged from February last year but was up $10,000 on January, the report from the Real Estate Institute of New Zealand shows.
The institute said that a recovery in transaction volumes in Auckland and Manawatu/Wanganui in February was encouraging and Auckland’s transaction volumes were marginally higher than in February 2009. But buyers were still being cautious, the report said.
‘Overall, the data is a bit of a mixed bag. February’s transaction volumes were always going to be an improvement on January, but the improvement in the raw medians in most districts as well as in the stratified median prices is a positive sign,’ said REINZ chief executive officer Helen O’Sullivan.
Reports from members indicate that although rents are rising in key urban areas and there is a continuing shortage of housing stock, particularly in Auckland, buyers are still being cautious, the report points out.
This is evident in the increased days to sell, which measures the time between the property being listed and an unconditional sale being completed. Equally, vendors are not under pressure to sell and landlords are successfully increasing rents, albeit by small increments.
Looking forward, O’Sullivan said that the recent cut in the OCR by the Reserve Bank of 50 basis points might provide some encouragement to buyers. ‘Equally, however, it makes it easier for current owners to hold if they don’t see the pricing they expect. We would be really pleased if the rate decrease had a positive impact on the construction of new housing stock, especially in the Auckland market,’ she added.
The Real Estate Institute said the earthquake had affected the volumes for Canterbury and the national total, so caution was required in analysing the data.
Some sales fail to complete if there has been substantial property damage and future sales are likely to be conditional on structural and geotechnical assessments, which will take time to complete.
Also an inability to get insurance cover is currently the single biggest factor affecting real estate sales in Canterbury.
Analysts said that the market is likely to stay flat for some time. ‘We are not yet becoming housing market bulls and continue to see median house prices remaining under modest downward pressure until the second half of this year. However, we are starting to see the beginnings of a possibly better backdrop for the nationwide housing market,’ said Phillip Borkin of Goldman Sachs.
‘Buyers will feel in no rush, given the lack of price appreciation in the market over the past year. The market remains tipped in the buyer’s favour, evidenced by the long number of days to sell a property at present,’ explained Chris Tennent-Brown of ASB.
‘We expect prices to remain down around 5 to 6% from the 2007 peak over the coming months. We also expect prices to hold up better in the regions with stronger population and wage growth over the year ahead,’ he added.