Property Market - First Positive Growth Since December 2009

June 2011

A monthly analysis of the New Zealand housing market in May reveals the continuation of a recent trend towards the market becoming less negative.  Momentum in the Auckland market is shifting rapidly and the region’s housing market is on the verge of an upturn.

The Mike Pero Mortgages-Infometrics Property Cycle Indicator (PCI) is released monthly, prepared from an analysis of changes in house sales, price movements and the time taken for properties to sell.

Mike Pero Mortgages Chief Executive Shaun Riley says “The PCI still being below zero in May indicates the market is still in downturn,” he says, “however it continued to become less negative in May and is now at -5.39. The result is being driven strongly by the Auckland market with a PCI of -1.04.

Mr Riley says sales volumes in May were up 11% from May 2010, the first positive growth since December 2009.

“The median house price slipped back $10,000 from the level in April and was unchanged compared with May last year.

Mr Riley says the third component of the PCI, the average length of time on the market for properties, was stable when compared with April (seasonally adjusted), and up two days from May 2010.

Rental inflation lifted to a three year high of 4.8%pa, suggesting the rental market may be tightening, giving landlords more ability to increase rents and improve their cash-flow.

Mortgage rates were unchanged in May.

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.