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Falling house sales may indicate faltering economy

Falling New Zealand house sale volumes and prices in January may indicate a domestic economy that's struggling to maintain momentum, according to economists.

Thursday, February 11th 2010, 3:05PM

by The Landlord

Commenting on house sales data briefly put on, and then removed from the Real Estate Institute's website, Goldman Sachs JB Were economist Philip Borkin said house sales tumbled 17% to 4,488 last month compared to January 2009. The median price fell $10,000 to $350,000 over the same period, while median days to sell remained constant at 36 days.

"The housing market's running out of steam - and quickly," Borkin said. "Again, it highlights the fragile nature of the recovery to date. As a good gauge of domestic demand, the weak housing turnover raises concerns over the sustainability of the recovery to date and emphasizes to us that monetary policy support will not be removed before June at the earliest."

The REINZ said it briefly posted the figures on its website in error today and doesn't plan to release the report officially until tomorrow.

Sales volumes have fallen over 31% over the past six months; close to the depressed lows of 2008, the figures show. The drop in turnover suggests the possibility of the economy experiencing another dip over 2010, said Borkin.

"While there is some merit in the view that the housing market is still being held back by a lack of quality properties listed for sale, we suspect that increases in fixed mortgage rates over the past few months has dented optimism," Borkin said.

"Nevertheless, on the back of these numbers, we would expect to see house price growth ease over the coming months."

Westpac Banking senior economist Donna Purdue said the bigger influence on January's house sale figures was a concern over potential changes to the tax treatment of housing.

"John Key's speech has ruled out the introduction of a capital gains or land tax, but changes to the tax treatment regarding depreciation will make property investment less attractive," Purdue said.

« Momentum building in house market, according to ANZREINZ residential highlights - January 2010 »

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ANZ 5.19 4.05 3.95 4.49
ANZ Special - 3.55 3.45 3.99
ASB Bank 5.20 4.05 3.95 4.39
ASB Bank Special - 3.55 3.45 3.89
BNZ - Classic - 3.55 3.45 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
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Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.35 3.35 3.35
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 ▼4.14 ▲4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - ▼3.39 ▲3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.55 3.39 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.55 3.45 3.99
Median 5.34 4.04 4.09 4.39

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