Property Market at Low Point for Third Consecutive Month

 Dec 10

“The nationwide PCI has remained at its lowest possible figure of minus-10 for a third consecutive month,” says Mike Pero Mortgages Chief Executive Shaun Riley.

“Sales volumes in November were down 15% from a year ago.  Although this result is still very weak, it is an improvement on the falls of more than 30%pa recorded in September and October,” he says.

Mr Riley says, however, the past month has revealed an interesting reversal of one of the factors the indicator watches.

“The median house price rose $10,000 from October’s level, to $360,000, reversing much of the price weakness apparent throughout the middle of this year. However, the median price can be relatively variable and further data is required to get a better feel for whether the November figure represents a more positive trend.”

The Mike Pero Mortgages-Infometrics Property Cycle Indicator fell to a negative 10.0 in September and has remained there since. The PCI is a sensitive measure of the housing market and includes three major factors – changes in the number of houses sold, changes in price and the time taken for houses to sell.

Of those, the time taken for houses to sell shows property took an average of 40 days to sell in November.

Mr Riley says this was the fastest rate of turnover in six months, once normal seasonal variation is accounted for. He adds the median number of days to sell, when seasonally adjusted, has been increasing over the past six months, though not as rapidly as it did between January and April.

Rents in November were up 3.3% from a year ago, maintaining a similar rate of growth to that recorded throughout most of 2010.

Floating mortgage rates were steady at 6.4% and there were minimal changes in fixed mortgage rates.

Background information

• The Property Cycle Indicator is prepared from an analysis of changes in house sales, price movements, and the time taken for properties to sell
• The monthly data is sourced from the Real Institute of New Zealand
• The Property Cycle Indicator runs from minus-10 to plus-10
• A Property Cycle Indicator value of -10 shows a strong downturn, while +10 shows a strong upturn in the housing market
• Lower sales volumes are usually the first indicator that a market upturn is coming to an end, followed by properties taking longer to sell
• House prices are usually the last variable to change direction
• House prices may still be rising, even though the Property Cycle Index is negative and showing a downturn

By incorporating the three variables, the Property Cycle Indicator gives a much better, and earlier, indication of shifts in the market.