House sales worst in 18 years

House sales plummeted last month to their lowest level in nearly two decades, says the Real Estate Institute of New Zealand (REINZ).

Just 3666 homes sold in January this year, the lowest monthly total since electronic records began in 1992 and only the second time the total figure has dipped under 4000.

"Activity in the residential property market was quiet last month on the back of uncertainty over what actions the Government intended to take on the recently announced Tax Working Group recommendations," said REINZ president Peter McDonald.

However, he hoped the market would pick up after Prime Minister John Key this week ruled out proposals to introduce a land tax, comprehensive capital gains tax or new tax on residential investment properties.

The total value of residential sales, including sections, in New Zealand in January was $1.53 billion. January's total of 3666 was 40 fewer houses than were sold in January 2009 and 1291 down on December 2009. The national median residential house price of $350,000 was up 7.7 percent on the corresponding figure of $325,000 for January 2009, but was $10,000 down on the median price for December 2009.

The largest gains were Otago, up 17.9 percent to $247,500, followed by Taranaki up 12.5 percent to $300,000 and Canterbury/Westland, also up 12.1 percent to $319,500. Central Otago/Lakes was the only region to experience a drop in median prices, down 10.4 percent to $410,000.

Auckland residential sales, including sections, accounted for $666m of total sales in January. Canterbury/Westland and Waikato/Bay of Plenty were the next greatest value at $191m and $183m respectively with Wellington not far behind at $172m.

The national median for days to sell in January was 43, 16 fewer days than the corresponding period a year ago but 10 more days than in December. Sales were quickest in Southland at 33 median days and in Auckland where the median days to sell was 36. ASB economist Jane Turner said the figures suggested the housing market was starting to lose momentum, but the bank was wary of data from over the holiday period.

"Monthly data can be volatile and this series is not seasonally adjusted. Running our own seasonal adjustment, house prices remained flat over December and increased 0.3 percent over January." However, the lift in the level of housing inventory relative to sales pointed to slowing demand, she said.

"The shift towards more supply relative to demand should see days to sell continue to lift over the next few months, and see house price increases slow or even decline." The Tax Working Group's strong recommendations that the Government needed to change the tax treatment of housing introduced considerably uncertainty into the housing market, which was likely to linger for some time, she said.

Despite the Government since ruling out the group's recommended measures, the bank did expect some changes to the tax treatment of property, which will be announced with the Government's budget in May That meant the housing market was likely to remain subdued for some time, Ms Turner said.