Housing gains spark optimism

Tony Alexander believes the worst is over for the NZ market. Photo / Mark Mitchell

Signs of recovery in the housing market were welcomed by estate agents but greeted with scepticism by some economists.

Real Estate Institute data showed the national median price rose by $5000 in a month to $340,000. Houses took an average 42 days to sell, two fewer than in March.

However, BNZ chief economist Tony Alexander warned against interpreting the figures as any big recovery or turnaround.

"I would not blindly extrapolate these figures to believe there's an upturn given tighter lending from banks, rising unemployment and the recent increases in longer-term fixed interest rates," he said.

"I'm fairly cautious about these although I do think the worst is over for the New Zealand housing market."

Nick Tuffley, ASB economist, said prices were still lacklustre and down 1.4 per cent on levels a year ago.

He prefers a different set of data that show price drops of almost 10 per cent.

"We prefer the QV measure of house price inflation which adjusts for the quality and composition of houses sold. That suggests house prices are down around 9.2 per cent for the three months to April compared to the same period in the previous year. Nonetheless, house prices tend to lag behind house sales by around three to six months and if the recent strength in house sales is maintained, house prices are likely to be close to the bottom," he said.

"While we expect that the housing market is now on a recovery path, it will be a mild recovery. The fundamentals for the housing market are not strong."

"Population growth is picking up, although it remains relatively modest. House prices remain high compared to income levels and rents.

"With unemployment rising, income prospects have deteriorated and households are becoming more circumspect on large purchase decisions and the amount of debt they wish to take on."

Nevertheless Mike Elford, Real Estate Institute president, said a degree of confidence had returned to the housing market and the data reinforced a level of price and volume stability.

Volumes slipped slightly from 6694 sales in March to 6210 last month. Turnover was strong in Auckland where 2081 houses changed hands, up on the 1350 a year ago.

Mr Elford said the latest data was not hugely significant but enough to generate a degree of optimism about the future.

The most popular category of houses was the sub-$400,000 price bracket - almost 4000 of the total April sales of 6210.

The Auckland region had sales of just over $1,090,544,541 in April. Nationally, houses sold for $2,538,995,503.

Peter Thompson, Barfoot & Thompson director, said: "The market is tough but we've got to move on and work with what we've got. It's not like it was three or four years ago."