Weak housing market starts to grow shoots

By Graeme Hunt

The housing market, which has been depressed for the past 18 months, appears to have bottomed out – at least in Auckland.

Though prices remain soft, the number of reported sales has risen in the past month and far fewer properties have been passed in at auction. The apparent change of heart reflects not so much the state of the economy but a slow turnaround in consumer confidence brought about by record low interest rates and greater housing affordability, especially for first-home buyers. This is reflected in the latest ASB housing confidence survey, which shows that in the past nine months those surveyed have become increasingly attracted to the housing market.

For the most recent quarter – the three months to April – 59 per cent of respondents felt it was a good time to buy a house, compared with 53 per cent in the previous quarter. ASB chief economist Nick Tuffey says the improved sentiment appears to be closely linked to the dramatic fall in interest rates in the past year. 

According to Auckland’s largest real estate agency, Barfoot & Thompson, the region’s housing market continued to surge in April, following better-than-expected performances in February and March. The average house price was $502,726, up 2.2 per cent on March. The number of sales at 809 was 79 per cent up on those for the same month last year. “Traditionally April sales volume and prices can fall away markedly compared to March,” Barfoot & Thompson managing director Peter Thompson says. “It is a seasonal factor, so to get an increase in price in April with only a modest fall in homes sold compared to the previous month is heartening. He is optimistic about the housing market but says people sometimes confuse the performance of investment housing with houses people buy to live in. “The biggest issue we are facing is the lack of stock,” he says. The lift in consumer confidence is good news for the real estate industry which, in the past year, has shed many salespeople and closed many offices.

Top Harcourts agent Gary Thomas, who is based in Ellerslie but sells houses all over Auckland, says there has been a marked increase in activity and inquiries this year. “This has been very evident in the past two months. Out of the inquiries there are people who are making decisions and buying. Eighty per cent of my deals have been on multiple offers. The market is almost turning on a coin.” Thomas, who has been selling houses for 14 years, says the turnaround could be attributed to realistic vendors and lower interest rates. Recent buyers had been in the market for up to 18 months. Thomas warns vendors not to view the renewed activity as an opportunity to hike prices. “Some vendors are going to get excited and put prices up. This is a sure way for the market to contract.”

The improved fortunes for urban housing seem to have kick-started the dormant beach-property market. In Mangawhai Heads, north of Auckland, there has been a pick-up in sales of lower-end baches – those between $200,000 and $300,000. Harcourts agent Susan Woodhead says she is having to work harder for sales but people who have been looking for baches for up to two years are now buying.

However, the renewed confidence in housing is yet to extend to commercial real estate. Retail market reports from Bayleys and CB Richard Ellis paint a picture of increased vacancies and falling rents as the recession continues to bite. CB Richard Ellis says commercial leasing had become less active in recent months with landlords having to offer incentives to attract tenants.