Lower prices and sales plunge reflect weak housing market

Auckland's residential property market is weak, economists say, with the city's largest estate agency saying sale numbers and prices are down on this time last year.

Barfoot & Thompson said the June total of 665 sales was 16 per cent lower than for the previous month, and the average price of $523,058 was down 3.6 per cent.

In June last year, the agency sold 861 properties.

ASB economist Jane Turner described the housing market activity in the report as "very weak", with the June sales numbers down a seasonally adjusted 15 per cent.

The Barfoot & Thompson figures provided a preview to likely movements in Real Estate Institute of New Zealand nationwide figures due on July 14, she said.

"Housing market activity is likely to remain very weak throughout the remainder of 2010, reflecting waning demand."

Tax changes around depreciation rules had reduced the attractiveness of holding investment property at the margin.

Slowing net migration and rising interest rates would reduce support for housing demand over the year, Ms Turner said, and she expected house prices to fall slightly this year.

The amount of downward pressure on prices would be limited by a low level of supply.

Goldman Sachs JBWere economist Philip Borkin said the Barfoot & Thompson figures were the first full read on the Auckland housing market after the May Budget.

While tax changes in the Budget obviously made property a less attractive investment, he felt they were not as bad as some had earlier feared and had raised the possibility that some pent-up demand in housing demand could be released.

But there was no sign of any release of pent-up demand in the Barfoot & Thompson figures; rather it was the opposite, Mr Borkin said.

Given the time it took to buy and sell a property, it might be too early to confidently say the Budget was having a sharply negative impact on the market.

"Nevertheless, while the results are interesting, there is no getting around the fact that today's data is weak."

Barfoot & Thompson chief executive Wendy Alexander said the figures were similar to the trend for June in the past five years.

May's Budget had contributed to lower sales but its impact on prices had not been great, and there was no indication investors were quitting the market, she said.

"If investors were getting out, listings would be up and prices would be under more pressure than they are.

"It adds up to a market that is uncertain, and many people are putting off making decisions."

- NZPA