Property market has aura of vulnerability

Indicators are pointing to further softness and consolidation in the property market.

Friday, September 22nd 2006, 12:00AM

by The Landlord

ANZ monitors a series of eight “property gauges”, in its monthly Property Focus commentary, to help it determine the state of the market.

It says that the gauges are portraying a market that remains brisk, but that contains an aura of vulnerability.
Of the eight gauges only one is supportive of rising prices and that is one of the less influential; namely global comparisons.

It says that New Zealand property is “still cheap on a global basis” and it notes that the market is becoming more integrated with Australia.

Two of the indicators that are neutral for prices are the supply/demand balance and migration.

ANZ says that supply has caught up with demand and that migration flows have stabilised around the 12,000 mark.

Factors depressing, or likely to push down, prices include:

Affordability: ANZ says house prices are at the expensive level and that rising prices are eroding affordability.
Serviceability/indebtedness: Households are becoming heavily geared and the cost of servicing the debt continues to rise.
Interest rates: Are high. New Zealand is at the top of the interest rate cycle and there is still a possibility that there maybe one more rise in rates from the Reserve Bank.

	House prices (Annual % change)	3 month % change	Average days to sell	Comment
Northland	16.1	2.8	39	Perky prices, with selling days heading south
Auckland	9.6	-0.5	32	Recent declines could be an ominous sign
Waikato	10.4	1.0	35	On a par with the nation
Bay of Plenty	9.0	1.1	46	Long time, good time and a competitive prive
Gisborne	19.1	-0.9	36	Settling down after a volatile patch
Hawke's Bay	0.5	-0.7	42	Taking longer to sell and getting less for it
Taranaki	13.4	1.5	29	Nice outlook in the 'Naki
Manawatu-Wanganui	11.6	8.2	32	Solid price rises
Wellington	5.3	0.2	24	A short black in the capital
Nelson-Marlborough	4.8	0.7	39	Getting back to its feet after a stumble
West Coast	15.8	3.5	39	The Coast enjoys the limelight
Canterbury	10.6	-0.1	32	Steady as she goes
Otago	19.2	10.2	42	Leading the price gains across the nation
Southland	2.8	5.8	28	Faster sales and rising prices
NEW ZEALAND	9.1	1.2	33	selling time drops to a six-month low