NZ: Housing market activity remains soft - ANZ

New Zealand’s housing market activity remains soft, especially in Auckland as prices are heading backwards in the region, although they are still rising (albeit at a slower pace) in other parts of the country, according to Phil Borkin, Senior Economist at ANZ.

Key Quotes

“It is therefore just a continuation of recent trends, and we don’t expect the picture to change any time soon. While softer housing market activity is certainly a headwind for the economy, we remain of the view that as long as it remains a case of ‘letting the air out gradually’, it is not an insurmountable headwind, and we still struggle to see a dramatic correction, given ongoing demand-supply imbalances. Certainly the fact that consumer confidence remains elevated leaves us comfortable with this view for now. However, we are on notice.”

“Key Results

• Seasonally adjusted housing turnover fell a further 9.2% m/m in July, to be down 25% from a year ago. This leaves turnover at its lowest level since November 2011. 
• The median number of days to sell ticked a little higher. In July, it rose 0.2 days in seasonally adjusted terms to 35.9 days. It was closer to 30 days when market momentum was strong, although it does remain well below its long-run average of close to 40 days.
• National house prices fell again. Our preferred measure of house prices – the REINZ House Price Index (HPI) – fell 0.4% m/m (sa). This is the third consecutive monthly fall, and the fourth fall in the past five months. This sees annual price growth ease to just 1.2%, which is the softest since mid-2011. 
• From a regional perspective, it is still largely an ‘Auckland versus the rest’ story, although softer trends are noticeable in most regions. Auckland turnover is down 31% y/y, while the rest of the country is down 21%. The median days to sell in Auckland (39 days) is actually above the region’s historical average, while the majority of other regions are still seeing property turn over at a faster-than-average pace. The HPI fell 0.3% m/m (sa) in Auckland, and is now down 2.2% y/y. Prices were flat for the rest of the country as a whole, and are still up 7.5% y/y. This regional divergence is not out of the ordinary and needs to be seen in the context of Auckland’s stellar outperformance over preceding years. The bungy-cord needed to snap back at some stage.”