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New Property Cycle Indicator

New Property Cycle Indicator

Homeowners now have a new tool – the Mike Pero Mortgages-Infometrics Property Cycle Indicator – for checking the state of the property cycle if they are thinking of buying or selling a property.

“There is a lot of information and comment available on the state of the housing market, but sorting out the fact from opinion is understandably not easy for the average person,” says Jeff Staniland, Chief Executive of Mike Pero Mortgages.

“The Mike Pero Mortgages-Infometrics Property Cycle Indicator, however, provides a simple number between minus-10 and plus-10 depending on the state of the market.”

A value of -10 shows a strong downturn, while +10 shows a strong upturn in the housing market. The Mike Pero Mortgages-Infometrics Property Cycle Indicator is being published on a quarterly basis and is prepared jointly by Mike Pero Mortgages and Infometrics.

“The latest Property Cycle Indicator, for the June quarter, shows that although house prices are still rising, the national housing market is in the second quarter of a strong downturn phase.

“House prices are typically the last indicator to change direction in a downturn,” says Jeff Staniland.

In the June quarter the national Property Cycle Indicator fell to -7.35, down from
-5.19 in the March quarter.

“The slow-down in the market is comparable to that observed in the second half of 2004,” says Jeff Staniland.

The average property, in the June quarter, took between six and nine days longer to sell compared with a year earlier, which is the longest time in up to four years. Sales volumes were 1.9 percent lower for the June quarter, compared with a year ago, although there were signs of improvement in May and June. House price inflation, after easing in the first quarter of the year, has stabilised at 11 percent pa.

The slow-down in the housing market is occurring throughout New Zealand. Wellington is the only region where the Property Cycle Indicator is positive, while the Nelson/Marlborough market appears to have emerged from the worst of its downturn.

The signs are that high interest rates are expected to persist until at least March next year, as a result of high inflation.

“Fixed mortgage rates are rising too, which is likely to limit the number of buyers in the housing market in the coming few months,” says Jeff Staniland.

“The Mike Pero Mortgages-Infometrics Property Cycle Indicator really does provide a much simpler and easily understood tool to help people understand what is happening in the housing market, both at a national level and in the regions.

“It shows that the market slowdown is already with us, but despite that prices are holding up very well as people simply wait longer for their property to sell, or perhaps decide not to sell at this time,” concludes Jeff Staniland.

Summary of the main markets (full August newsletter attached)

Auckland: the weakest market in the country (along with Central Otago Lakes) with a Property Cycle Indicator of -9.3. Auckland also had one of the slowest rates of house price growth at 7.8% pa in the June quarter.

Wellington: the only area with a positive Property Cycle Indicator at +0.93, and has now been the best performing market for the past four quarters. There are, however, early signs of a slow-down with the average time taken for a sale increasing for the first time in 15 months.

Canterbury: with a Property Cycle Indicator of -6.67 Canterbury is slightly better than the national average. Sales growth returned to positive territory in the June quarter compared with a year earlier, but buyer demand remained soft with houses taking, on average, ten days longer to sell than a year ago. House price inflation has edged down to a three-year low of 10% pa and is likely to continue slowing this year.



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