Housing market peaked

Deutshce Bank reckons that the housing market has peaked and that the Reserve Bank will cut rates in June and July.

Sunday, March 2nd 2003, 10:33PM

by Jenny Ruth

As if anyone doubted New Zealand is enjoying a housing boom, the latest figures show housing consents in January were at their highest level for a January month since 1974, or 29 years.

The Statistics New Zealand figures show 1,995 new homes worth $340.3 million were approved in January which compares with 1,486 in January last year and 1,335 in January 2001.

That was still down from the 2,532 homes, worth $381.5 million, approved in December. The main reason for the falloff being a sharp drop in the number of apartments approved from 642 in December to 254 in January.

While total approvals were down 11% from December, excluding apartments, the fall was only 1.3%. December approvals were 12.5% up on November.

Statistics New Zealand says the trend in the number of new homes has been increasing steadily since November 2000.

Deutsche Bank senior economist Darren Gibbs sees signs of a slowdown in the figures. "We think that the housing market has peaked. Given the usual lags, we expect that a decline in building activity will begin around the third quarter," he says.

Deutsche Bank is now expecting the Reserve Bank will cut its Official Cash Rate in two stages from 5.75% to 5.25% in June and July and that there could even be a third cut by the end of the year.

The housing figures show most regions recorded a higher number of new housing consents compared with January last year with Auckland continuing to be the main contributor. It accounted for 41% of the total January consents, although Canterbury and Wellington also showed significant increases.

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