Housing Market Steady in September Quarter
MEDIA RELEASE: 10 NOVEMBER 2006
Housing Market Steady in September Quarter
The housing market steadied in the September quarter compared with the previous three-month quarter, with the national market entering the third quarter of a downturn.
The Mike Pero Mortgages-Infometrics Property Cycle Indicator (PCI) was minus 5.9 for the September quarter, slightly higher than the minus 6.86 (revised) recorded during the June quarter. The PCI provides a number between minus 10 and plus 10 depending on the state of the market.
“Most areas throughout New Zealand recorded a rise in their PCI in the September quarter,” says Jeff Staniland, Chief Executive of Mike Pero Mortgages.
Nelson/Marlborough was the best performing region with a positive PCI of 2.01 in the September quarter, following a string of negative PCI numbers.
Wellington, however, slipped from slightly positive to into the negative (minus 4.62) on the PCI.
The national median time for a house to sell improved slightly in the September quarter compared with the June quarter, but is still four or five days longer than a year earlier.
National sales volume has stabilised around 100,000 properties per year, but the September quarter figure was still 3.5 percent lower than a year earlier.
House-price inflation also eased to 8.7 percent, a three-year low.
“There are many mortgage holders who are having to renew their relatively low fixed rates set a couple of years ago. Rising wholesale rates are limiting the banks’ ability to reduce interest rates to the levels seen a couple of years ago, although the Reserve Bank’s decision to leave the official cash rate at 7.25 percent in October has eased the upward pressure on rates.”
“House price inflation is expected to continue to slow over the coming year, but a national fall in house prices is not likely given the tight labour market and the ability of householders to service their debt,” says Jeff Staniland.
Summary of the main markets
Auckland: some improvement in July and August although that did not carry through to September. Annual house price inflation eased to 5.8 percent; sales growth was similar to the June quarter; while houses were only taking two days longer to sell than a year ago, compared with a six-day gap in the June quarter.
Wellington: June’s early signs of a slowdown gathered pace, with PCI dipping into the negative following four positive quarters. House price inflation eased to 11 percent (15 percent in May) and the mid-year burst of sales has not continued.
Canterbury recorded its ninth straight negative PCI and house price inflation slipped to 6.8 percent, its lowest level since early 2003. Sales growth was also negative with houses staying on the market for the longest time in three years.
THE MIKE PERO MORTGAGES-INFOMETRICS PROPERTY CYCLE INDICATOR
- The Mike Pero Mortgages-Infometrics Property Cycle Indicator is a new tool for measuring the state of the residential property market
- It is being made publicly available for the first time
- It will be updated monthly on www.infometricsproperty.co.nz
- The Property Cycle Index is prepared jointly by Infometrics and Mike Pero Mortgages
- Infometrics is one of New Zealand’s most respected economic consultancies and forecasting agencies, with more than 25 years of experience in the building and property sector
- Mike Pero Mortgages is New Zealand’s largest and most trusted mortgage broker, and has been serving its many thousands of clients since 1991
- The Property Cycle Indicator provides information at a regional level, as well as New Zealand as a whole
- The Property Cycle Indicator is prepared from an analysis of changes in house sales, price movements, and the time taken for properties to sell
- The monthly data is sourced from the Real Institute of New Zealand
- The Property Cycle Indicator runs from minus-10 to plus-10
- A Property Cycle Indicator value of -10 shows a strong downturn, while +10 shows a strong upturn in the housing market
- Lower sales volumes are usually the first indicator that a market upturn is coming to an end, followed by properties taking longer to sell
- House prices are usually the last variable to change direction
- House prices may still be rising, even though the Property Cycle Index is negative and showing a downturn
- By incorporating the three variables, the Property Cycle Indicator gives a much better, and earlier, indication of shifts in the market