January house sales at near record lows

Thursday, 15 February 2024

There were just 2995 house sales nationwide last month, the Real Estate Institute’s latest figures show.

It’s been a slow start to the year for the housing market, with new data revealing the second lowest level of sales for a January in over 30 years.

But house prices also rose more than expected, economists say.

The Real Estate Institute released its latest figures on Wednesday, and they showed that 2995 homes were sold nationwide in January.

While that was an increase of 4.9% on the same time last year, it was down 44.1% on the 4509 homes that changed hands in December.

The national median house price was $760,000 in January, down 2.5% from December and 0.7% from the same time last year, the figures showed.

ANZ economist Andre Castaing said prices were up 1.0% on a monthly basis and 0.9% annually once seasonally adjusted, and that was stronger than expected.

But given sales were so weak he was reluctant to read too much into the lift in prices, he said.

The average number of days it takes to sell a house has lifted to 44 days.

“Sales were abysmal. It was the second weakest January since 1992 for sales, led by unusual softness in the provinces. The only weaker January was during 2023 when prices were falling.”

“Days to sell lifted two days to 44 days, matching the softness in sales and the recent rise in housing inventories.”

Despite low sales, the strong price data would not soothe the Reserve Bank’s fears around inflation, and it would worry record migration was fuelling a rebound in prices, he said.

ANZ expected that ongoing inflationary pressures would lead the Reserve Bank to hike the OCR to 6% by April.

Castaing said that would take the wind out of the sails of the housing market, as enthusiasm around mortgage rates falling soon would turn to fear that they might continue to rise.

“Given the change in sentiment and the weak signal from a number of leading indicators, the risks to our price forecasts are skewed to the downside.”

Westpac senior economist Satish Ranchhod said the market remained on holiday in January, as with interest rates still relatively high, buyers remained on the sidelines.

The housing market will not pick up until mortgage rates drop, Westpac’s Satish Ranchhod says.

While January did tend to be a quieter month for the market, the number of sales was very subdued, he said.

“That’s despite rapid growth in the population over the past year. Much of the softness was in Auckland, but sales remain low in other regions also.”

The institute’s figures had prices up 1% in January, once seasonally adjusted, but they rose by just 2% over the past 12 months, and had been tracking sideways since September, he said.

“We’re left with a picture of limited momentum in the market. We expect the current softness will gradually give way to a period of stronger activity, underpinned by a multi-decade high in population growth and investor sentiment.”

But until borrowing rates dropped the market was likely to remain moribund, he said.

Kiwibank chief economist Jarrod Kerr said it had been a rocky few months for the market, but activity always dried up over the hotter months, and it was showing signs of improving.

Market activity is showing signs of improving, Kiwibank’s Jarrod Kerr says.

The institute’s figures showed prices were out of the red and into the black, although they were still down over 14% from the November 2021 high, he said.

“But the momentum has turned. And it needs to, in order to encourage investors back to invest, and developers to develop.

“We have a housing shortage, exacerbated by surging migration, complicated by climate change related risks, and our policymakers focus more on demand than supply.”

Increasing supply, rather than limiting demand would better balance the market, and the new government’s policy changes were a positive, he said.

“Record migration flows are boosting demand for rentals, which will boost developer confidence, and house prices will be impacted by strong marginal buyer interest.

“We’re forecasting a strong 5% to 7% increase in prices this calendar year.”

Real Estate Institute chief executive Jen Baird said January was usually a slower month for sales, and this year was no exception.

A 10.4% increase in listings was a strong indicator the market continued to pick up, but challenges, such as inflation and interest rates meant some buyers remained cautious, she said.

“But most regions are reporting more buyer activity across the board, with some seeing a particular surge in first home buyer interest.

“Vendors are also being confident, but realistic with prices as activity increases. This is likely to resolve in inventory moving over the coming more active months in the year.”