Warning issued over February house price rise

Economists are warning against reading too much into the latest house sales data showing big price and volume jumps.

ASB economist Jane Turner said although sales were up 40 per cent in February, this reflected the usual bounce post- holiday period.

Real Estate Institute figures for last month showed 5228 houses were sold, up from January's 3706 and the national median rose from $325,000 to $330,000, trends president Mike Elford said showed activity had returned to the market.

But Jane Turner said adjusting for the seasonal pickup, volumes rose only 8.3 per cent following from the previous months 6.8 per cent fall. Volumes are 18 per cent below the levels of a year ago.

"We place little weight on this month's recovery. The trend in house sales remains flat despite some monthly volatility with housing demand yet to make a convincing recovery. While large declines in the mortgage rate have prevented housing demand falling further, the level of house sales remains weak. Potential house-hunters are either waiting for house prices to fall further or feeling cautious due to economic uncertainties. Higher deposit requirements are another hurdle for first home buyers," she said.

Goldman Sachs JBWere (NZ) investment research director Shamubeel Eaqub said the length of time it takes to sell had increased from 59 days in January to 62 last month and this suggested a large mismatch between demand and supply.

"Prospective house buyers are able to take their time in a low-demand market. Unwillingness to accept lower prices may also be holding time to sell dates high. The housing market remains oversupplied and we expect this to continue to push house prices lower," he said.

Median house prices were also not the best measure of house prices because the data was not adjusted for changes in the composition of sales. QV housing data was adjusted and showed that house prices are down 8.9 per cent for the three months to February compared to year-ago levels, he said.

Elford said the latest data showed a big turnaround.

More people were asking about properties and prices were up in most of the regions surveyed.

January had been exceptionally bleak and the market had been affected by the holidays.

"While we must still take a cautious approach the February figures seem t indicate that lower interest rates and real estate as an investment option are having a positive impact on the market," he said.

The bounce back from the horrific January figures is welcome, but we must still acknowledge we're dealing with light volumes compared with recent years, Mr Elford said.

The national median house price in February was $330,000, up $5000 on January's $325,000 and only slightly lower than the $337,500 median in February 2008 and $335,000 in February 2007.

"In nine out of 12 districts, higher median prices were recorded in February; the only drops were in Auckland (down from $422,000 to $421,500) Taranaki (down from $266,750 to $260,000) and Central Otago Lakes which dropped from $457,500 to $425,000," REINZ said.