Housing implosion confirmed: Broker

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"The housing implosion is now confirmed," Goldman Sachs JB Were says after reading the latest sales statistics from Auckland's largest real estate agent.

Tuesday, May 6th 2008, 5:00PM

by The Landlord

The numbers, from Barfoot and Thompson, show that Auckland house sales in March and April together were down 54% on a year-on-year basis. (It has combined the numbers to remove the impact of Easter falling in March).

'On a seasonally adjusted basis, sales in the past two months were down 21% versus February.'
Adding concern to the equation is the soaring inventory levels. These now stand at 14.1 months. “A level not seen since the 1997/98 recession.�

“Of most concern is the continued rapid accumulation of inventory of unsold homes,� Goldman Sachs JB Were says.

“Even though average house prices are now down 2.1% year-on-year, the market is still failing to clear.

“This is a significant risk to the outlook for the housing market, particularly house prices.�

The market hardest hit appears to be at the higher end of the price range with house sales for properties worth more than $1 million down 60% in 12 months. Houses in the next band ($750,000 to $1 million) were down 56%. At the next level, ($500,000 to $750,000) sales were down 55% and in the sub-$500,000 bracket the decrease was 50%.

GSJBW says these figures illustrate the risks facing the economy and financial stability.

“With accumulating evidence of broad-based slowdown in the economy and credit rationing by banks, the need to pursue very tight monetary policy has reversed.�

Barfoot and Thompson though puts a positive spin on the results saying, “prices are continuing to hold� despite the slow turnover.

“The average sale price for April was $520,380, down just 2.2% on this time last year and ahead of the March quarter average of $511,740.�

Barfoot and Thompson managing director Peter Thompson says one of the most interesting aspects of the results is a growth in the proportion of sales occurring in the less than $500,000 bracket, has not lowered the average price.

“Sales in the less than $500,000 price bracket increased from 42% of our total sales in March to 48% in April. Logically it could be expected that this would reduce the average price – but that wasn’t the case.

“This suggests two things. That new buyers entered the market encouraged by the wide range of stock available and that price discounting is nowhere near as prevalent as media reports would have us believe.�

It was a steady month for Barfoot & Thompson’s property management team with 617 fresh lettings (compared to 622 in March and 548 a year ago). The average weekly rent remained steady at $390 (compared to $391 in March).

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