First Merchant Finance

Rising house sales volumes combined with a historically low Official Cash Rate and an acknowledged upcoming shortage in housing stock are three powerful drivers of the price recovery in the Auckland Market.

In April, the city’s largest real estate agency group, Barfoot & Thompson, recorded a strong month for house sales and volumes.  The group reported a total of 809 sales over the greater Auckland area for the month – a 79% increase from the same month in 2008.  In a month where sales volumes are usually subject to a seasonal downturn, the increase is suggestive of a stabilizing market.
According to Barfoot & Thompson Managing Director, Peter Thompson: “It’s a seasonal factor, so to get an increase in price in April with only a modest fall in the number of homes sold compared to the previous month is heartening.  It demonstrates the housing market has found strength at its present level, and with confidence returning an increasing number of people are prepared to make buy and sell decisions.”

With the Reserve Bank clearly indicating the cash rate will remain at or below its current basement level for the next 18 months, the market of potential borrowers is expanding, and their borrowing power is increasing.

From the supply side, an 18 month period of crippled debt markets and largely paralyzed domestic lenders has meant many developers have been unable to commence or complete projects.  Statistics NZ estimates that Auckland needs 12,000 houses per year.  In the year to February, only 3722 new dwelling consents were issued.   By next year, the city’s housing stock shortage will pass 9000, exceeding 15,000 by 2012.