KEY POINTS:
Auckland house prices are likely to recover from their slump in the next two years, says a study issued yesterday.
The PMI residential property overview predicted better times for the city's housing market soon because of a combination of two factors.
Although Auckland had an oversupply of apartments, it did not have too many houses, the survey found.
Consumer confidence was also likely to recover next year, pointing to a brighter future.
"That is likely to lead to a more stable performance by the Auckland property market heading into 2010," the survey carried out by Infometrics predicted.
It noted the grim times now, saying a 47 per cent drop in house sales in the March quarter in Auckland was the biggest of any region in New Zealand.
National sales are at a 10-year low because, on a quarter-by-quarter basis, price appreciation looks to be falling at the fastest rate in a decade.
In the first quarter of this year, they were down 40.3 per cent on the same period last year.
House price appreciation has dropped to 2.1 per cent in comparison with 13.8 per cent a year earlier.
The survey predicted better times ahead for house sales nationally.
Economic growth is expected to recover from 1.9 per cent by next March to 2.3 per cent by March 2010.
Nor would this year be as bad as some are predicting.
"Throughout the rest of this year, sales volumes are expected to hold reasonably stable," PMI predicted.
Landlords could be the big winners of the current market cycle because their incomes were likely to increase.
"There is scope for rents to continue rising strongly over the next year as mortgage payments continue to increase," the study said.
First home buyers who have been priced out of the market this decade could gain from the market conditions.
High job security would help to shield the housing market from any major catastrophe.
"Unemployment is expected to remain below 4 per cent over the next two years and good job security combined with healthy income growth will help to shield the housing market from larger price falls," PMI said.
"Given the substantial life in property values over the last five to six years, a relatively soft landing in house prices is forecast over 2008/09 with average falls of between 3 per cent and 4 per cent."
The Real Estate Institute is due to issue its figures for April today. Its current report found Auckland prices were better than many other areas.
"The Auckland region appeared to experience a rally, up from $427,000 to $437,500, but this was largely driven by a fall in cheaper property sales in Auckland city," the institute said of the March figures.
BNZ chief economist Tony Alexander is predicting house vendors would need to cut their prices aggressively, perhaps by 10 per cent on average.
By later this year, he said, interest rates would begin falling, wages would continue to rise at around 5 per cent and people would still be in their jobs.
BRIGHT NEWS FOR AUCKLANDERS
PMI Survey findings
* Auckland has New Zealand's most expensive houses.
* There is a city-wide median price of $432,000.
* Prices are expected to fall until later this year when the market may pick up again.
* Sales volumes are expected to hold reasonably stable throughout the rest of the year.
