March spike in Auckland house sales

BusinessDayBy ADRIAN CHANG – BusinessDay

The Auckland housing market has emerged from its hibernation as sellers are forced to accept lower prices, the city’s leading real estate firm says.

Barfoot and Thompson – which sells around one in three houses in the Auckland market – says it sold 924 homes in March, the most number of houses sold by the firm in 20 months.

Sales are up 65.3 percent from the 559 homes sold in February, and 46.2 percent from the same period last year.

However, March 2008 was something of an aberration, seeing the fewest sales for that month in more than a decade.  When this year’s sales are compared to March 2007, sales are down 36 percent.

Meanwhile, sellers have had to accept lower prices, with the average sales price in March down 4.1 percent from February to $491,780.  Compared to March 2008, prices were down 5.8 percent, where the average sale price was $522,336.

Barfoot and Thompson managing director Peter Thompson said March’s surge in sales was the combined result of a spike in sales traditionally seen in March, falls in the Official Cash Rate, bank mortgage rates falling to new lows and tax cuts.

“Buyers may be sensing that market prices are close to the bottom of the cycle and have made the decision to act,” said Thompson.

He said the firm sold nearly 300 more homes in March than in any month in the whole of 2008.

“At the same time sellers are accepting that a price that is on average only 6 percent below values being achieved 12 months ago is realistic in the current market, and are ready to accept.”

Goldman Sachs JBWere investment research director Shamubeel Eaqub said on a seasonally adjusted basis, the 46.2 percent year-on-year surge in sales in March is the highest since November 2007.

He said while it was too early to call a bottom, and sales levels were still historically low, this month’s data from Barfoot shows the first encouraging signs of traction from lower interest rates.

“This is a positive sign that lower interest rates are beginning to work, enticing buyers back into the market.  Still, falling average prices suggests softer prices and lower interest rates are combining forces to bring buyers and sellers together,” said Eaqub.

However, he warned there remained considerable uncertainty around the durability of a property market uplift, as job losses had yet to hit the economy and local and global economic conditions remained challenging.

Thompson noted the increased level of interest in auctions, with 65 to 70 percent of all sales in March attributed to auctions.

March’s surge in sales, along with a 1398 new listings, have trimmed the company’s existing stock of unsold houses down to 6416 listings, the lowest number in 13 months.