The Property Market is Now in an Upturn

Oct 11

A monthly analysis of the New Zealand housing market, the nationwide PCI, moved into positive territory in August for the first time since March 2010, which indicates that the property market is now in an upturn, driven largely by the improving Auckland market. 

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 market turnaround has been driven by growth in the Auckland market, with Waikato, Hawkes Bay and Manawatu also showing a positive trend,” he says, “2010 was a very soft year and 2011 has seen stronger property sales and has also resulted in higher levels of mortgage approvals. Good properties are selling quickly and house prices are relatively stable.”

Mr Riley says “sales volumes in August were up 21% from a year ago, and are at their highest level (seasonally adjusted) since December 2009”.

The median house price was $355,000, recovering from a softer result in July, and up 1.4% from August 2010.

The third component of the PCI, the average length of time on the market for properties, was 39 days, a rate of turnover that has not been bettered since March last year.

Rental inflation held steady in August at 2.3%pa.

And Mortgage rates were virtually unchanged for the Month of August, apart from a very small increase in the one-year fixed 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.