Nationally house prices rose 0.2% in November, down from the 1.3% gained in October but they are still surging ahead in Auckland where demand for real estate remains high, the latest figures from the Real Estate Institute of New Zealand show.
Compared to a year ago, the housing price index has increased by 6.6% and prices are now 2.9% below the peak of November 2007.
But property sales fell for a second month in November from 6,091 in October and 6,464 in September. While the median time to sell a house rose to 33 days from 31 in October, and fell from 44 days in November last year, the institute said.
But it is a different picture in Auckland where prices have soared nearly 12% over the past year compared with 4.7% in Wellington and 5.7% in Christchurch.
Analysts expect the slower pace to continue in 2010. Reserve Bank Governor Alan Bollard said last week that house price inflation would moderate in 2010, reducing the need for him to raise the benchmark interest rate before the middle of the year. But lenders have increased home loan interest rates for fixed terms of one year or longer as global funding costs have increased, and this could curb demand for property.
‘No longer do borrowers get the benefit of certainty and low rates that had been a feature of previous cycles. The prospect of higher interest rates and a still weak labour market will continue to be major headwinds facing the housing market,’ warned Khoon Goh senior economist at ANZ National Bank.
Unemployment is also rising, up to a nine-year high of 6.5% in the third quarter of this year and predicted to reach 6.7% next year, and this could have an effect on the real estate market.
The level of sales is consistent with troughs in previous housing downturns, according to Goh. ‘It could hint at the start of an easing in housing market activity at a time when we are getting a supply response with a rise in the number of houses for sale,’ he said.
Indeed sales volumes have fallen 13.6% over the past two months to the lowest level since March. ‘We would be surprised if this signalled a cyclical turn for the worst in housing. However the latest data, along with subdued weekly mortgage approvals, suggests the extraordinary bounce over the first half of 2009 is behind us, and the outlook for sales activity is far more balanced from here,’ said Bernard Doyle of Goldman Sachs.
