Housing Market Remains in Decline Over Past Month

Housing Market Remains in Decline Over Past Month

The property market remained in decline during the month of October, according to the latest Mike Pero Mortgages-Infometrics Property Cycle Indicator (PCI).

“The nationwide PCI has remained at its lowest possible figure of minus-10 for the second consecutive month and the second month in two years,” says Mike Pero Mortgages Chief Executive Shaun Riley.

“This latest figure suggests house prices will come under increased downward pressure in the next few months.

“House sales volumes in October were down 36% from a year earlier, the largest annual decline since the height of the financial crisis in late 2008. A sharp drop in sales activity in Auckland was the main contributor to this decline. “

Mr Riley says the median house price stayed the same this past month.

“ The median house price held at $350,000 for the third consecutive month in October,” he says. “Relative to October 2009, the median house price was down 1.4%, the first annual decline since May 2009.”

The Mike Pero Mortgages-Infometrics Property Cycle Indicator fell to a negative 10.0 in September and has remained there since. The PCI is a sensitive measure of the housimg market and includes three main factors – changes in the number of houses sold, changes in price and the time taken for houses to sell.

The latter factor – time taken for houses to sell - reveals property took an average of 41 days to sell in October. When adjusted for typical seasonal variation, this was the slowest rate of housing turnover since March 2009.

Rental inflation slowed marginally to 3.5%pa in October.

Both floating and fixed mortgage rates were unchanged in October as the market continued to expect the Reserve Bank to leave the official cash rate unchanged until at least March 2011.

(See attached pages for PCI graphs)
[MIKE_PERO_MORTGAGES.pdf]

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

ENDS

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