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Tony Alexander BNZ Economist ‘Weekly Overview’ 7th April

Here are our main housing themes  Auckland’s market has ended a pause and is now going up again underpinned by a worsening shortage of property.  Regional markets are well underpinned by investor demand and that is propelling more construction which in some smaller lifestyle-like centres will eventually lead to excess supply.  Falling interest rates will encourage more investors to seek property assets while having little impact on already outbid young buyers. A new wave of out bidders is coming.  Construction costs will keep rising with the latest extra costs coming from better health and safety regulations.  The Reserve Bank will soon again warn about housing and get closer to using non-interest rate controls in the regions – e.g. a 30% investor minimum deposit requirement. This week we learnt that in Auckland Barfoot and Thompson real estate agency sold 1,341 dwellings which was a 16% fall from a year earlier but firm 15% seasonally adjusted rebound from February. However this monthly rebound followed a 20% fall in February and if we look at the entire March quarter we see sales were down 11% on a year ago and flat seasonally adjusted. Thus we might lean toward saying that a period of weakening sales since the start of October could have ended. The average sales price jumped to $867,000 in March from $822,000 in February but this measure always jumps a large amount at this time of year as the nature of stock being sold shifts a tad toward houses from apartments. Compared with a year ago in the March quarter average sales prices were ahead by 9.6%, but down around 3% from the December quarter. It is however normal for this three month price change to be quite weak compared with earlier months so we would not advise extrapolating out the 3% fall to an annualised decline of 12%. Lets assume for the moment that prices have flattened. One cannot say either that they are trending down or that retracement since October has definitely ended. Stock remains in short supply, which generally means prices risk rising further. The number of new listings received in March was 6.2% fewer than a year earlier and at the end of the month the stock of listings was down 7.6% from a year ago.

for the full report please follow this link; Tony Alexander Weekly Overview 7th April 2016

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