A pick-up in the housing market is not likely to rattle the Reserve Bank or weaken its resolve to keep interest rates low, economists say.

The Real Estate Institute yesterday reported turnover of 6168 residential properties last month, up 37 per cent on February last year.

Some of that increase would reflect the fact that this is a leap year and in any case it still left turnover at only about two-thirds of the average February level between 2004 and 2007.

The Reinz housing price index is 2.7 per cent higher than a year ago, driven by an 8.7 per cent rise in Auckland and 7.1 per cent in Christchurch, but still 3 per cent below its peak in late 2007.


Westpac chief economist Dominick Stephens said the pick-up in turnover was unlikely in itself to rattle the Reserve Bank, which had incorporated a stronger housing market into its forecasts last week.

"Our concern is that the bank may be underestimating the inflationary consequences of a housing recovery," he said.

Goldman Sachs economist Philip Borkin said that in the past this much of a housing market recovery would have raised concerns at the central bank about the flow-on to consumer spending and inflation.

"However, as house price growth remains contained at present and considerable concern exists over the high New Zealand dollar, the Reserve Bank has effectively signalled it is comfortable absorbing further recovery in turnover before it would consider withdrawing monetary policy stimulus."

In its monetary policy statement last week the Reserve Bank noted that the traditional relationship between house sales and credit had broken down.

In the year ended January mortgage debt grew 1.2 per cent, compared with double-digit annual growth in the boom years between 2003 and 2007.

New homebuyers might have become more cautious and increased the size of their deposits, the bank said.

When governor Alan Bollard appeared before Parliament's finance and expenditure committee last Thursday he was asked about the risk of another housing boom.

He said he did not expect a return to the conditions of the mid-2000s but if that were to threaten it would be appropriate for the Reserve Bank to use new "macro-prudential" tools like requiring the banks to hold more capital or restricting loan-to-value ratios.