The housing market is not only weak, it’s likely to stay that way for the rest of this year through into 2001.
That’s the view of BNZ Chief Economist Tony Alexander, who estimates that overall house prices are still about three per cent overvalued. However, Auckland prices are an estimated four per cent below their trend with the rest of New Zealand.
Alexander comes up with a stack of facts, figures and opinions in month’s New Zealand Observer. He says:
- A record decline in consumer confidence, as shown in the latest WestpacTrust McDermott Miller survey, is very bad for the housing market where confidence in future prices is an important issue. The percentage of people saying they would use a $5,000 windfall to invest in real estate has fallen from 2.4 per cent in the March quarter to 0.9 per cent in the June quarter.
- On average, house prices nationwide are now about where they were in September 1997. In Auckland, they’re about where they were at the end of 1996.
- Is it likely prices will surge soon because of some special factors? That seems near impossible, says Alexander, listing a number of deterrents including cyclically high interest rates, an existing oversupply of rental propertiesl, high household debt levels and "dis-saving".
He also says there’s strong anecdotal evidence of investors looking to flick their purchases of three to five years ago.
Housing turnover figures aren’t so flash either. In May, it took an average 51 days to sell a house compared with 45 days last year. That’s also nine days longer than the May average right back to 1992.
Good news? Well, Alexander says there was an unusual surge in the number of dwelling consents issued in May (up 15.1 per cent from April).
"One would be unwise to read the rise as the start of a new trend, however, given the fundamentals for the housing sector at the moment. We expect reversion to monthly declines very soon."
