15 Mar 2011

Economist predicts housing market pick-up

7:52 am on 15 March 2011

An economists says housing market activity should pick up in coming months, driven by lower mortgage rates.

Real Estate Institute (REINZ) figures show residential sales stood at 4,500 in February, a decrease of 10% on the same period a year ago.

National median prices rose to $350,000 but the number of days to sell a property rose to 47 on average.

Last month's devastating earthquake in Christchurch brought activity in the region to a halt, and sales slumped 44%, according to REINZ figures.

Goldman Sachs economist Philip Borkin says the market is showing signs of improving, albeit from depressed levels, with rental inflation increasing in the Auckland market and demographic pressure beginning to emerge.

While banks have lowered lending rates, high unemployment, and a focus on repaying debt is likely to dampen the recovery in the market.

Mr Borkin doesn't expect a sharp rebound in Canterbury's housing market, as happened following the 4 September quake, because of the extensive damage in the latest quake, difficulties in getting insurance and the drift of people from the region.

But he says lower interest rates, coupled with the massive rebuilding programme in Canterbury, means the Reserve Bank could reverse last week's cut quickly if inflation gets out of hand.