House sales tumbled in January while properties took longer to sell, suggesting uncertainty about the economic outlook is damping demand even as mortgage rates fall, according to the latest raft of data from the Real Estate Institute of New Zealand (REINZ).
The total number of homes sold nationwide last month fell to 3,706, a 17-year low, down from 4,302 in December and a drop from 5,186 in January 2008.
“This is the lowest figure we have seen in recent years by quite some margin,” REINZ president Mike Elford says. “Before 2008 the lowest turnover of houses we have seen on the New Zealand market was January 1992 when the number of houses sold was 4,427.”
The sales data “is clear evidence that people are treading cautiously and reflects the uncertainty of the wider economic environment,” says Elford.
The median house price slipped to $325,000 from $328,500.
The length of time taken to sell a house rose to 59 days in January, the longest since 2001, from 45 days in December. It took 49 days to sell a house in January last year.
Reserve Bank Governor Alan Bollard has slashed the benchmark interest rate, helping drive down mortgage rates, and has said further reductions are possible this year as global growth slows and inflation abates.
Falling interest rates are not yet having much impact in reviving the housing market, according to ASB economist Nick Tuffley. “We continue to expect that the impact will be modest.”
Sales turnover has been relatively flat since mortgage rates began to drop in the second quarter of last year, however Tuffley believes lower rates appear to have at least put a floor under sales activity, “though turnover needs to pick up on a sustained basis to signal that the market is starting to turn”.
Job security will be the biggest growing concern for prospective buyers over the coming months.