9 Jul 2013

Fewer people selling when they buy a new house - economist

1:00 pm on 9 July 2013

An economist says one reason there's such a shortage of houses available to buy is that people aren't selling their existing houses when they buy new ones.

Figures released last week showed new listings of houses available for sale fell to their lowest number for a June month in seven years.

The Real Estate Institute's website, which accounts for about 95% of listings, recorded just over 9000 in June, an 18% decline from May. It says the stock of unsold houses on the market is at a record low of 25 weeks compared with the long-term average of about 38 weeks.

Bank of New Zealand chief economist Tony Alexander, who regularly surveys real-estate agents, says low interest rates are making it easy for people not to sell.

He says it's happening particularly in Auckland, where agents are coming across people who, when shifting from their first home into their second, are keeping the first one as an investment.

Supply predicted to get even tighter

Mr Alexander says supply will get even tighter as net migration increases and investors play catch-up after putting off investing because they thought prices might fall; the same goes, he says, for first home buyers who put off buying between 2008 and 2011.

He says another factor is that Aucklanders going overseas or being posted to other places in New Zealand are holding onto their properties in the belief that if they sell, they won't be able to afford to buy in Auckland again.

Mr Alexander says that perhaps once interest rates rise, some of those extra houses will be sold off.

Real Estate Institute director Bryan Thomson says the weather may also be a factor in the fall in prices.

"We've got some abnormal impacts on the market, particularly if you look at Canterbury, and we all know why," he says. "But you also can see that we're in the middle of winter and the number of properties offered for sale historically reduces; simply because it's not a great time of year for a lot of sellers to make a decision. And we've had a really rough month of weather."