What's up with the housing market at the moment?
"Ouch" would probably be the best way to describe real estate conditions, says Bank of New Zealand Chief Economist Tony Alexander.
Writing in the bank's latest New Zealand Observer, Alexander points out that:
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December dwelling sales (see ) were down nearly 24 per cent on December 1998 and were actually the lowest for any December since 1991; and
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During that month it took 43 days on average to sell a house, more than six days above the average for Decembers since 1992.
Why? Alexander cites rising interest rates (both floating and fixed) as well as the lack of action in the residential real estate market this cycle (no stories on rising house prices, no "atmosphere of quick moulah to be made" as was the case from 1993 to 1996).
"Third, the focus on the potential Y2K bug, election implications (higher taxes, more unionism) and continued migration outflows may have kept people from making what for most is the biggest financial decision of their lives.
"Some agents contend that the low turnover figures reflect an absence of listings. Sorry friends, but if that was the case then prices would be rising and they are not."
However, Alexander is still tipping that real estate turnover will improve by about ten per cent this year. Rising interest rates and tax increases will take their toll. However, he says that market strength will come from migration flows turning positive later this year, strong employment growth taking the unemployment rate below six per cent by year's end, and rising incomes for farmers and other businesspeople benefiting from the low exchange rate and firm overseas growth.
