The underlying picture of the market remains of a gradual pick-up in demand, with turnover outside of Canterbury up further and days taken to sell edging down. House prices are starting to register increases in Auckland (up 4.9% yoy), with other regions broadly flat in recent months.
Canterbury was clearly impacted by the series of earthquakes on June 13. These caused more damage to buildings and disruption. Importantly, they will have contributed to market uncertainty. Furthermore, in June there was extensive debate in Christchurch in the lead-up to the Government announcement over the Red Zone houses and the Government purchase package, and that may have also contributed to buyer caution. The extent of the disruption to the Canterbury market in June was milder than in both September and February. Turnover is likely to recover over July and August, based on the experiences after the more major earthquakes. In addition, over the next year or so, homeowners whose houses are written off or purchased by the Government will contribute to higher sales activity. Prices of houses sold in Canterbury have been quite steady this year.
The housing market is continuing to recover gradually. Auckland is already becoming a sellers' market as stock levels fall and buyer competition warms up. Other parts of the country will follow suit. We expect nation-wide house prices will increase at a 3% annual rate heading into 2012, with Auckland likely to be stronger than that.
There are no fresh implications for the RBNZ out of this release. After this morning's strong GDP figure and revisions we now expect the RBNZ will lift the OCR by 25bp in December (previously January).
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