KEY POINTS:
The days of putting a holiday on the house may be over, as plunging property sales put the brakes on consumer spending.
A study by Westpac economists shows high interest rates have finally slowed spending from home equity, with the biggest effects being felt in Auckland.
Housing equity withdrawal has fallen by more than half since September, dropping from $5 billion annually to an estimated $2 billion this March.
As Westpac estimates about a quarter of the money withdrawn from housing equity is spent on consumer items, that represents a big loss for retailers.
Westpac senior economist Doug Steel said it was likely housing equity withdrawal had slowed far more sharply in Auckland than elsewhere - a factor that was probably behind the region's falling retail sales.
Auckland's retail spending was down more than 2 per cent in March, the fourth month in a row Auckland retailers had fared worse than their national counterparts.
Mr Steel said the amount of equity people withdrew from their homes was strongly linked to the number of house sales.
People usually walk away from a house owning more equity than when they bought it - so fewer house sales means fewer opportunities for people to spend housing market gains.
Auckland house sales have fallen faster than the rest of the country, with Real Estate Institute figures showing the number of houses sold in the past two months was less than half that in March and April a year ago.
Add higher house prices to that - meaning Aucklanders are likely to have bigger-than-average mortgages - and it was not surprising that Aucklanders were closing their wallets faster than the rest of the country, said Mr Steel.
Auckland was hurting from a slow-down in the surge of new migrants that helped kick-start the city's housing boom in 2002 and 2003.
Auckland tended to gain a bigger share of migrants than the rest of the country, so slowing migration had a large effect on the region's housing market.
Annual net migration in the year ended last month was 4700, less than half the inflow recorded in the previous April year.
It's not only Aucklanders who are slowing their spending.
A Treasury report out this week said falling house prices across the country could cut consumer spending by making homeowners feel poorer, as they cut back on items such as televisions, dishwashers and computers.
HOW AUCKLAND COMPARES
* National number of housing sales in March: 5129, down 53 per cent from March 2007.
* Auckland number of housing sales in March: 1621, down 58 per cent from March 2007.
* National number of housing sales in April: 4464, down 45.5 per cent on April 2007.
* Auckland number of housing sales in April: 1350, down by 52.5 per cent from April 2007. Auckland retail sales for the March quarter (seasonally adjusted) fell 1.8 per cent, or $96 million, from the December quarter.
* Total retail sales for the country remained unchanged for the March quarter.
