KEY POINTS:
House sales in the first quarter of 2008 are down more than 40 per cent per cent on the same period last year, according to new research from PMI Mortgage Insurance.
It shows a 53.3 per cent fall in sales from the same month last year and house price growth slumping to 2.1 per cent in comparison with 13.8 per cent a year earlier.
For the overheated Auckland market, price falls are predicted for the rest of this year, with stability expected to appear towards the end of 2009.
This March quarter price gain reported by PMI was lower than in each of the previous three quarters - house price growth has not been slower since 2001.
PMI says that on a quarter-by-quarter basis, price appreciation now looked to be falling at the fastest rate in ten years.
"The trend in home price appreciation indicates that there is a significant correction under way in the housing market." said Ian Graham, PMI chief executive.
"On average, prices are expected to fall by 3 to 4 per cent over the coming year, although the substantial drop in sales activity suggests the market is at risk of average prices declining by as much as 10 per cent from their peak," added Graham.
The PMI report is not entirely filled with tales of woe and misery. In the section about the Auckland market, there is at least an indication of when some light may appear at the end of the tunnel.
After considering the impact of falling house sales, (47.6 per cent down in the March quarter) and a small (0.7 per cent) price increase, it does say that there is "little evidence of an oversupply of non-apartment housing" in the region, it says.
"Thus a recovery in consumer confidence in 2009 is likely to lead to a more stable performance by the Auckland property market heading into 2010."
However easing net migration and a "severely oversupplied apartment market" are expected to lead to house price falls in the second half of this year.
Sales volumes for the rest of the year are expected to hold "reasonably stable". "The market is unlikely to become any more favourable for sellers, but people under some pressure to sell property will be forced to lower their sale prices from what the property was originally listed at"
"Buyer interest is likely to be rekindled somewhat as bargains become more common."
The PMI research comes two days after Auckland's biggest real estate agency group, Barfoot & Thompson said dropped 50 per cent last month from April last year to 453 - the slowest turnover since December 2000.
Despite the slowdown, the agency's average sale price stayed relatively stable, falling 2.2 per cent to $520,380, more than the March quarter average of $511,740.
Barfoot & Thompson generated 39 per cent of Auckland housing sales in March. The Real Estate Institute of New Zealand's figures are due at the end of this week.
Growth in rents reached a four-year high of 7.1 per cent for the twelve months to March 2008, with softening house prices concentrating investors' focus on the income generated by their properties. High financing costs have also raised the pressure on landlords to increase rents.
It is likely rents will continue rising strongly over the next year as mortgage payments continue to increase and property values decline.
- NZ HERALD STAFF
