Property Market Indicates Slight Improvement

Media release for immediate use – March 21 2011

Property Market Indicates Slight Improvement

Monthly research indicates a slight improvement in the property market, but is not yet cause for celebration.

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.

The latest results show the nationwide PCI continued to improve in February and reached a seven-month high of -8.52. However, Mike Pero Mortgages Chief Executive Officer Shaun Riley says the market is still in downturn.

“Any figure below zero indicates the market is in downturn,” he explains. “The February figure shows the extent of the downturn has moderated a bit more over the past month.

“The PCI is a sensitive measure of the housing market and includes three major factors – changes in the number of houses sold, changes in price and the time taken for houses to sell – and it pays to look at those factors closely.”

Separating out the contributing factors, Mr Riley says sales activity in February was down 10% from a year ago, although if Canterbury/Westland is excluded because of the earthquake, the decline in sales volumes was just 4.3%.

The median house price lifted back to $350,000 in February, unchanged from a year ago but up $10,000 from the January result.

Mr Riley says turnover of property was markedly slower in February.

“Houses took an average of 58 days to sell last month,” he says. “Once the usual seasonal pattern is allowed for, this was the slowest rate of turnover in two years.”

Rental growth slowed to 1.7%pa in February, the weakest growth since early 2010.

Mortgage rates were unchanged during February, but declined in early March as the Reserve Bank cut the official cash rate following the Canterbury quake.

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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