Buyer uncertainty prompted by the Tax Working Group January report is behind the property market deterioration but it is expected to pick up after the May budget is announced, according to Mike Pero Mortgages.
Mike Pero Mortgages chief executive Shaun Riley told the National Business Review the tax treatment of investment property in the next month’s government budget will not be “as bad as a lot of people think” and it will layoff many buyers’ fears.
"Our sense is that a lot of people have delayed their buying decisions until they see what actually comes out of the budget.
"There was a lot of uncertainty created by the Tax Working Group [January] report. The number of [mortgage] approvals in the January to March quarter was down 30% over the same time last year industry-wide.
"The April index will be down a bit but once the May budget comes out the market will normalise and pick up again."
The Mike Pero Mortgages-Infometrics Property Cycle Indicator (PCI) - which measures changes in the number of houses sold, changes in price, and the time taken for houses to sell - fell to a positive 1.61 PCI in March, from 3.98 PCI in February.
"The nationwide PCI was still positive in March 2010, but it looks set to move into negative territory within the next month or two. This shows a definite continued easing off in the housing market."
Mr Riley said sales volumes in March were down 8% from a year ago and despite the median house recovering to a new record high of $360,500, up $10,500 from February, it probably gives a false picture of the strength of the market.
"The March figure is likely to be a technical bounce-back from weak results in January and February. Prices tend to be the last of the three indicators in the PCI to turn around, so it’s expected these will also follow the deterioration in sales with a lag."
The time taken for houses to sell – PCI’s third measure – showed improvement from the same time last year.
"At 35 days, the average number of days to sell property was down nine days from March last year."
Looking at the geographic spread a number of regions moved into negative territory in March, with the two main North Island cities losing ground, but managing to retain a positive PCI, said Mr Riley.
Auckland is down 3.95 PCI from 5.80 PCI in February, and Wellington is down 1.91 PCI from 4.47 PCI in February.
In the South Island, Canterbury/Westland’s PCI moved into the negatives with a PCI of -2.06, a decrease from 0.37 in February, as did Nelson/Marlborough’s, with a PCI of -1.55, down from 0.60. Otago also lost ground with a PCI of -2.49, down from 0.14 in February.
However, rents in March were up 2.8% from a year earlier, which was weaker than the growth in February, but better than any other month since November 2008.
Floating mortgage rates held steady at 6.0% for the sixth consecutive month. Fixed mortgage rates were slightly lower across the board, as expectations of the first interest rate rise by the Reserve Bank were pushed back.
Wed, 11 Jul 2018