13 Aug 2010

Housing market hits new low

9:59 pm on 13 August 2010

Financial markets have shrugged off a report which shows the housing market in New Zealand fell to a new low in July.

The benchmark NZX 50 index rose 8 points, or 0.2%, to close at 3015 on turnover of $44 million, while the dollar gained on Friday afternoon after a jump in retail sales brightened the economic outlook.

Just 4411 houses changed hands, the lowest total for the month of July since Real Estate Institute records began in 1992.

In July last year, 6014 houses were sold. The number of days to sell a property remained at 45.

The annual increase in prices also fell for the fifth consecutive month to just 1.8%.

However, markets shrugged off these figures, concentrating instead on June retail sales.

Sales rose 0.9% during June, the biggest monthly increase since August 2009. For the quarter, sales rose 0.5%, keeping up the momentum of the first three months of the year.

The New Zealand dollar surged half a cent against the US currency on the news and was holding that ground on Friday evening, trading at US71.47 cents.

Economist picking prices to stay flat

Philip Borkin, an economist at Goldman Sachs JBWere, believes house prices could be flat for some time to come and the market is facing a battle to move up.

"Net migration has slowed quite aggressively; the Reserve Bank has been tightening monetary policies, so we've seen the shorter term interest rates rise.

"Consumers or households are looking to pay down debt and ... we believe house prices are still looking a little expensive."

However, Mr Borkin doubts house prices will fall significantly.

ASB economist Jane Turner says the housing market is going sideways and is picking prices to fall by 3% over the next few months as demand remains muted.

On Monday, figures issued by Quotable Value showed growth in house values slipped for a third successive month in July. The median house price rose 2.6% to $369,000 in June compared with the same period a year ago.