Residential property prices in New Zealand were stable last month and there is an air of normality returning to the market but prices could fall due to rising mortgage costs, according to analysts.
Sales numbers during February recovered from their lowest level in nearly two decades, but the national median price stayed at $350,000, the same as the month before, the latest data from the country’s Real Estate Institute shows.
According to Real Estate Institute of New Zealand President Peter McDonald property sales turnover have returned to normal levels for a February. But it is taking longer to sell a property.
‘Agents report an air of caution amongst buyers, most of whom are genuine home seekers as opposed to investors, and this is reflected in the increase to 46 in the median days taken to sell a listed dwelling,’ he said.
The REINZ Monthly Housing Price Index, regarded as a more accurate measure of nationwide real estate movements, increased by 0.4% in February compared with a fall of 1.2% in the previous three months.
It said prices are now 4.9% below their November 2007 peak. In Wellington property prices were 8.2% higher than a year ago and up 7.2% in Auckland.
The housing market is losing momentum according to ASB Bank economist Jane Turners. ‘The steady climb in days to sell from October’s lows suggest the balance between supply and demand is returning to normal following a period of under supply through spring,’ she said.
Philip Borkin, economist at Goldman Sachs JBWere said higher fixed mortgage rates, despite falling slightly over the past month, appear to have dented optimism. ‘In addition, an increased number of listings on the market is also likely to lead to downward pressure on house prices. We expect annual house price growth to ease and be broadly flat by the end of this year,’ he added.
New Zealand is awash with unsold houses which could take nearly a year to clear, claims The Institute of Economic Research’s principal economist, Shamubeel Eaqub. ‘According to realestate.co.nz there were 54,381 homes for sale in February. There were 5029 sales in February. At that rate it will take 11 months to clear the current inventory.
Last year, the market had seven to eight months of inventory. Sales are stuck at very low levels and the market is awash with unsold homes,’ he explained.
He also believes that rising mortgage rates are affecting the market. ‘Valuations are stretched and there is risk of a downward correction. The weak level of home sales reflects the lagging effects of rising mortgage rates. Policy uncertainty may also be discouraging activity. The current depressed level of home sales suggests the economy is not yet out of the woods and the real estate industry is not in a pretty shape,’ he added.