Source: Radio New Zealand
The Real Estate Institute says the number of sales fell 7.9 percent year-on-year in April. RNZ
Cost-of-living pressure has started to hit the housing market.
The Real Estate Institute says that its data for April is the first clear sign that the weight of cost-of-living pressures such as higher fuel costs, food prices, insurance and local body rates has been influencing buyer decisions in a meaningful way.
The number of sales fell 7.9 percent year-on-year in the month, and 2.1 percent when seasonally adjusted compared to the month before.
“The impact was not uniform, however. Regions with higher vehicle dependency and lower median household incomes, including Hawke’s Bay, Manawatu-Whanganui, and Marlborough, saw the largest softening in activity, consistent with pump prices hitting household budgets most directly in those areas,” the institute said.
“Canterbury, Southland, and Otago continued to record solid sales activity, though this reflects the relative strength of their local market fundamentals rather than any insulation from cost pressures.”
Infometrics chief executive Brad Olsen said it was quite a big shift.
“Probably just as important was the fact that you saw prices that pulled back further. Back in March, you had a little bit more of a lift pre-crisis coming through both on a monthly and annual basis.
“Whereas the change in prices in the month of April showed that level of pressure [on buyers] … What’s also clear looking at the numbers is that there is a bit more or the continued North-South divide. The further down the country you go, the generally better economic results or housing results were coming through.
“Figures for the likes of Otago and Southland were looking a whole lot more upbeat than what you were seeing in, say, Auckland.”
Infometrics chief executive Brad Olsen. RNZ / Samuel Rillstone
The institute said the market was in a “testing mid-cycle position”, past the initial shock of the war in the Middle East and into the secondary effects, as well as facing the potential for an official cash rate increase sooner than expected.
It said an election year also meant buyers and sellers were likely to make decisions more slowly.
The median sales price eased by 0.6 percent year-on-year to $775,000.
The house price index, which is designed to smooth out movements caused by a change in the sales mix, was down 0.9 percent year-on-year and Auckland’s was down 2.8 percent.
Olsen said the 0.9 percent fall was one of the largest back to the start of last year.
But eight of the 16 regions the institute tracks recorded year-on-year increases in median prices. The largest lifts were in Southland and Northland, both up 6.2 percent, Gisborne, up 4.3 percent, and Waikato up 3.4 percent.
Olsen said what happened next depended a bit on the wider inflation picture,
“You’ve got more expensive fuel, you’ve got interest rates likely increasing, you’ve got everything else that was expensive beforehand as well. But it’s also sort of the confidence knock that you’re seeing.
“Consumer confidence isn’t at a fantastic level at the moment … people have fallen back quite a bit in terms of where they think the economy is heading. And so a lot more people might well hunker down, I guess, to a greater degree.
“That does moderate expectations heading forward. And I guess the challenge probably out there in the market will be what’s going to drive that stronger level of demand that would pick up prices and sales activity and similar.
“It’s just hard to figure out what that would be in the current climate when everyone’s feeling much more downbeat. And again, you wouldn’t feel like people would be rushing out to go and purchase housing because they will be worried about, potential increases in interest rates and job security, their general higher cost of living, all of those elements likely to hit.”
He said any nascent momentum in the market looked to have stalled.
The number of properties for sale lifted 3.9 percent year-on-year.
Nationally, 14.1 percent of sales were via auction, up from 13.7 percent in April. In Auckland, almost 23 percent of sales were by auction.
The institute said the looming prospect of an OCR increase in the coming months meant that the housing market no longer had the tailwind of expectations of falling interest rates.
“The key question for May and June is whether listings continue to build faster than sales can absorb them as we move into winter.”
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand