House sales going ballistic

Indeed, he refers to sales of existing homes as going "ballistic," even though Real Estate Institute president Rex Handley has described the market as merely returning to more normal levels.

The number of homes sold in January was a robust 6,771, even though the month is traditionally slow because of the holiday season. In only two months of 2001, November and August were sales higher. It compares with just 4,741 sold last January.

"When you’re looking at it from a central bank’s perspective, you’re not looking at actual levels, you’re looking at rates of change," Toplis says.

"The rate of increase is quite astounding. We haven’t had an increase of that magnitude since back in 1995/96."

He also dismisses the January building consents figures, which showed consents fell 0.9% in seasonally adjusted terms from December, at odds with market expectations, as "neither here nor there. More important is what activity is like compared to this time this year," he says.

The unadjusted figures showed 1,526 new homes approved in January compared with 1,335 in January last year.

In the three months ended January, sales were up 37.2%. "Turnover by itself is nothing to get excited about, but it is often seen as a precursor to higher prices and a tighter building market."

Toplis also points to the 7.1% rise in mortgage borrowing in January on a year earlier, the surge in net migration, rising consumer confidence and the still strong employment market as all bolstering the housing market. In particular, average weekly earnings rose 3.4% in the year ended November. "The last time real wages grew by more than this was back in May 1997," he says.

He notes that since January, bank bill rates have been edging higher "but intense competition in the domestic banking market has kept a cap on the floating (mortgage) rate, which could well stay near current levels until the central bank actually moves."

While fixed rate mortgages have moved higher, there’s no evidence that’s curbing housing activity.

Toplis admits there aren’t any signs of house price inflation yet. The median house price dipped from $178,000 in December to $175,000 in January, the same level it was at in January last year.

"We’re not pressing the panic button with regards to the housing sector just yet" but it will bear close scrutiny in the next few months," Toplis says.

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