Latest Auckland property sales figures from the region's biggest real estate company show that prices held steady last month but the number of listings is starting to rise - perhaps signalling an improving market for buyers.
Sales volumes in February were down 15 per cent on the same period last year, according to Barfoot and Thompson, but the actual number of available listings reached its highest level since March 2013, at 3674.
Barfoot & Thompson managing director Peter Thompson said these figures indicated that the market was good for buyers, "but sellers need to be cautious not to overprice their properties."
"We are starting to see a return to listings levels of October and November last year," he said. "For buyers, that's good, they can start to shop around, but greater choice means more competition. Sellers will need to be realistic and not overvalue their assets if they want them sold."
Supply-side pressures will also start to ease, but only slowly - which should keep prices tracking upwards, albeit at a slower rate than has been seen recently.
February sales were steady for an average house price of $678,533 - a rise of 4.8 per cent from January. The February median price was $620,000, up 6.9 per cent from the month before.
Thompson said February sales figures were consistent across all price spectrums with a slight increase in the number of sales across higher price levels.
ASB Bank economist Daniel Smith said the February sales figures suggested the slowdown in sales volumes seen over the November-December period may be carrying over into early 2014.
"January data had pointed to a partial rebound in sales, but this data for February suggest that was short-lived. According to our own seasonally-adjusted estimates, the number of sales in February was the lowest since March 2012. If that softness is sustained, and if it is reflected in the more comprehensive REINZ data released next week, it points to a further slowing in demand."
Smith did point out that the Barfoot and Thompson data had "shown quite a bit of volatility over recent months, and a similar drop-off in sales volumes in December was not mirrored in the REINZ figures."
"Overall, the lower level of sales seen over recent months implies that the imbalance between supply and demand will ease," said Smith. "But while the number of homes coming onto the market remains so low the improvement will be only gradual. That will most likely continue to drive prices upwards, albeit not at the same pace as was seen over 2013."
Smith said today's release "provides a hint that the LVR restrictions' impact on sales may linger for longer than previously anticipated - especially if the drop in sales is mirrored in next week's more comprehensive REINZ figures. "
However, over time we expect investors will step into the gap. This, combined with a strong lift in inward migration, should help to limit the fallout for house prices in 2014. Nationwide, we expect the pace of house price inflation to slow from almost 10 per cent in 2013 to around 6.5 per cent this year.
"We still expect the demand-side impact to ease slowly over time as buyers find ways around the restrictions and banks - whose new high-LVR lending has so far been well below the level of the restrictions - step up lending to those with less than a 20 per cent deposit."
He did expect the degree of pressure in the Auckland and Christchurch housing markets to ease slowly throughout this year.
"While the LVR restrictions have reduced demand somewhat early in the year, the expected increases to the OCR will have a much more noticeable impact. Supply-side pressures will also start to ease, but only slowly - which should keep prices tracking upwards, albeit at a slower rate than has been seen recently."
Westpac Bank senior economist Michael Gordon said today's Barfoot & Thompson stats showed that the housing market " has cooled substantially since the high-LVR restrictions came into force in October last year. "
"Unfortunately the B&T figures don't shed much light on the impact that the LVR restrictions are having on house prices," said Gordon. "The average and median sale price series are not quality-adjusted, and as the breakdown of sales shows, there has been a massive shift in the composition of sales."
"The LVR limits have gutted the lower end of the market (the habitat of first-home buyers), while the higher end remains largely untouched (sales of properties over $1m set a new record high in seasonally adjusted terms in February). Consequently, both the average and median price measures are being skewed sharply higher - an 18 per cent rise in the median sale price is well out of line with other indicators of what's going on in the Auckland housing market."
Gordon said his view had long been that the lending restrictions would bite hardest initially, as first-home buyers drop out of the market.
"However, over time we expect investors will step into the gap. This, combined with a strong lift in inward migration, should help to limit the fallout for house prices in 2014. Nationwide, we expect the pace of house price inflation to slow from almost 10 per cent in 2013 to around 6.5 per cent this year."
