First home buyers get house prices moving

By ANNE GIBSON

Fuelled by more interest from first-home buyers, the housing market is recovering from its sluggish levels of last year.

Latest figures show that monthly sales reported for February exceeded 6000 for the first time since March last year.

But commentators are saying that the 6182 sales for February were still below the levels experienced in the late 1990s. For example, sales in February 1997 totalled 8080 houses.

Last month's figure was a quarter up on January's 4741 sales.

"This is the best news to come out of the housing market in a year," said Real Estate Institute president Rex Hadley.

The figures released yesterday by the institute showed February's sales were worth $1.2 billion, well up on January's level of $994 million, although January is often a slow month because of the number of people on holiday.

The recovery was nationwide - 10 of the institute's 11 regions showed an increase in sales volumes, with Northland's slight decrease the exception.

The Auckland market was particularly robust, with 1895 settlements and the median house price rising from $240,000 to $247,000.

Mr Hadley said that the market was being driven by first-home buyers who had delayed buying last year when economists were predicting a rise in interest rates.

"Not only did that not happen, but interest rates have come down darned near two percentage points. But people were put off by those predictions."

He said other factors were healthy export and retail sectors and higher business confidence.

"The recent lowering of the official cash rate indicates a continuation of the current low interest rate environment," he said.

Garth Barfoot of Barfoot & Thompson said sales volumes throughout the 49-office chain were the best they had been for four years.

"In February 1996, we sold 849 properties. In February 2000 we sold 590, but in February 2001 we sold 708 properties.

"That gives you an idea of the recovery. But it's not a boom - we're not back to the figures of four years ago."

He said the increase was more of a recovery, as people now saw Auckland houses as good buying, because many were still selling for less than their Government valuations.

AMP Banking's home affordability index reflected the improved fortunes of the December quarter.

The index showed affordability recovered by 0.4 per cent nationally, with the fall in fixed interest rates outweighing the increase in the median dwelling price over the period.

Professor Bob Hargreaves, from Massey University's finance, banking and property department, said that he had noted the improvement but he questioned whether there had been a huge recovery.

He said that February's sales of 6182 were lower than the 6392 properties sold in February 2000.



The chief economist with the Bank of New Zealand, Tony Alexander, questioned the REINZ figures, which he said had come from a low base.

He said that comparing the three months ending in February with the three months to November showed a 7 per cent improvement in the number of sales.

Chief economist with the National Bank Brendan O'Donovan said the housing market had bottomed and was on its way up.

He said that after making seasonal adjustments the figures showed there were more sales at the lower end of the market for three main reasons.

These were that there had been strong employment growth in the latter part of last year, interest rates were dropping and the migration outflow from New Zealand was now beginning to turn.