Housing demand softening in provinces

A turning point for the worse in the housing market is not too far away in the majority of regions, notably Gisborne, Hawke’s Bay and Taranaki, ANZ Bank says in an economic report today.

Monday, May 21st 2007, 1:25PM

by The Landlord

The bank monitors the ratio of consents (supply) to economic growth within a region and the ratio of house sales to consents. If consents are growing faster than demand growth within the region, this indicates excess supply, as does a fall below trend in the ratio of sales to consents.

The majority of regions are now showing early signs of a market that is set to move in the favour of buyers. The bank says most of these “rurally aligned” regions show signs of pending excess supply relative to demand. These include Gisborne, Taranaki, Hawke’s Bay, Manawatu, Otago and Southland.

The ratio of consents to GDP has been trending up in Gisborne, Taranaki, Hawke’s Bay and Manawatu. In these same regions, the ratio of house sales to consents has fallen below the historical average.

Such areas have been key housing hot spots for the past three years. But with measures of supply-demand balance deteriorating, the bank says these regions will be the first to show signs of moderation.

Supply-demand indicators are “broadly in balance when looking at Northland, Waikato and Canterbury,” it says.

Demand-supply housing balance measures across the regions highlight Auckland and Wellington as the national hot spots where the market remains tightest, showing clear excess demand relative to supply.

However last week’s REINZ housing market report showed continued strong gains in house prices across the nation. Demand remains strong, and a lack of supply was also noted as fuelling gains.

The Reserve Bank is still looking for a turn in the housing market cycle, with its interest rate hikes designed to slow demand.

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