Is the worst of the housing slump behind us

By | May 13, 2009

13 May 2009

Source: Newstalk ZB

The worst of the housing slump may be behind us, as figures show house prices growing slowly across the country.

The median house price has risen $10,000 to $340,000 since February.

The estimated number of house sales rose 17.9 percent month-on-month in April, following a 9.2 percent month-on-month increase in March. The level of sales activity has lifted 57 percent since November and now stands at the highest level seen since November 2007. However, activity remains about 14 percent below the average level seen over the past decade.

Auckland seems to be leading the market, with sales in Auckland now up 54.1 percent year-on-year while sales outside of Auckland rose 32.6 percent year-on-year. Sales in Wellington were up 23.8 percent year-on-year.

Darren Gibbs from Deutsche Bank says activity levels have now clearly moved off the historic lows seen last year as households quickly respond to the very low interest rates on offer.

“We wonder whether the recovery in activity can progress much further in 2009 (although we have penciled in a 5% month-on-month rise in sales in May) in light of the general weakness we are still observing across most of the economy, including a deterioration in labour market conditions. We will certainly be watching this data very closely over coming months.”

But he says the recovery in house sales point to a much brighter outlook for retailers and residential home builders towards the end of this year.

“This is consistent with our view that the economy will return to positive GDP growth in the final quarter of this year provided that global economic and financial conditions stabilize in line with our projections. ”

Deutsche Bank says the Reserve Bank should hold the official cash rate at current levels until around the middle of the year and not the latter part of next year as the RBNZ suggested last month.