Auckland house sales hit four year high

Photo / Herald on Sunday

The Auckland residential property market "bounced into life" in March, with sales volumes reaching their highest level in a month in nearly four years, Barfoot & Thompson said.

"It was a month's trading that came out of the blue, and exceeded anything we have ever experienced," said Peter Thompson, managing director of Barfoot & Thompson.

The average selling price hit an all time high of $581,190, helped by a number of buyers purchasing property in the over $500,000 category.

This pushed the number of homes sold for the month to 1070, 75.7 per cent higher than in February and 15.4 per cent higher than in March 2010, Thompson said.

At least one economist has welcomed today's figures as a possible signal that renewed consumer spending may be about to happen.

The focus on higher value properties saw the average selling price for the month exceeding that for February by more than $59,000 and that for March last year by more than $36,000.

"What March's sales activity confirms for us is that the Auckland market is reacting in a different way to the rest of New Zealand.

"The formation of the Auckland region into one city has brought home to people the dynamic growth projected for the region, and the looming shortage of dwellings to house a future population in excess of 2 million people," said Peter Thompson.

"Combined with buyers reaching the conclusion that values are at the bottom of the price cycle, the economy looking likely to rebound in the next 12 months and interest rates at historically low levels, and you have the perfect conditions for people to commit to buying."

Goldman Sachs NZ economist Philip Borkin said it was "becoming clearer that the Auckland housing market is outperforming".

"Housing turnover is increasing, prices appear to be stabilising and rents are rising. This may signal the beginnings of an improved consumer spending backdrop, although it is too early to make a call on this yet given the cautious household behaviour over the past 24 months."

He said the average sales price was boosted by "a reasonable increase" in the proportion of property sales over $750k.

"However, this in itself could be seen as a measure of improving confidence in the market," said Borkin. "It is becoming clearer that the Auckland housing market is outperforming the rest of the country. While the recent reductions in mortgage rates will be supporting activity and sentiment, we believe the outperformance is more fundamental in nature."

"With historically low levels of new building and net migration (while not at strong levels) likely to be more supportive of Auckland housing demand than other parts of the country, we suspect demographic pressures are slowly beginning to surface. This is also shown by increases in average rents, which at $434 per week is also a new record high."

Borkin said that given the housing market's properties as a good "leading indicator" in NZ, and the Auckland region being "the consumer juggernaut" that it is, this may signal the beginnings of an improvement in the consumer spending backdrop.

"We think it is too early to make a call on this yet given that household behaviour remains one of caution and deleveraging, but we are watching closely."

Borkin said that evidence was gradually beginning to mount "that a more robust recovery is around the corner and this will eventually warrant tighter monetary conditions. We continue to feel this is more an early 2012 story".

Thompson dismissed any suggestion that the sale of multimillion dollar homes had distorted the average price.

"While in March we sold 14 homes with values in excess of $2 million, compared to 4 in March last year, if we remove the $2 million homes from the figures totally, the average selling price would still have increased to in excess of $560,000.

Thompson said he did not believe Auckland was seeing the start of another housing price bubble, rather that the figures represented a return of confidence in the market.

Barfoot & Thompson listed 1551 new properties in March, in line with the number for February and down 7.2 per cent on March last year.

At the end of March the company had 5807 properties on its books, down 4.2 per cent on those for February and down 7.3 per cent on March last year.