Leading indicators for house prices turn sharply lower in May

18th Jun 10, 3:07pm by Bernard Hickey

<p>Mike Pero Mortgages-Infometrics Property Cycle Indicator in negative territory, indicating further price falls</p>

The Mike Pero Mortgages Infometrics Property Cycle Indicator (PCI) slipped further into negative territory in May and is at its lowest level since March last year.

The PCI brings together a compilation of leading indicators for the housing market, including changes in house prices, changes in the number of days to sell and changes in the volumes of houses sold. The PCI fell to a negative 3.71 in May, from -0.86 in April.

“For the first time since March last year, houses spent longer on the market than in the same month the previous year. In May 2010, the average number of days to sell property was 43 days, compared to 42 days in May 2009," Mike Pero Mortgages Chief Executive Shaun Riley said.

“All regions moved further into negative territory in May, with Auckland also having a negative PCI last month.” Auckland moved into negative territory to -0.95 (down from 2.17 in April) and Wellington also lost ground, dropping to a PCI of -2.57 (from -0.12 in May). In the South Island, Canterbury/Westland’s PCI dropped slightly to -4.90 (a decrease from -4.14 in April), as did Nelson/Marlborough’s, with a PCI of -4.55 (from -3.51).

Otago also lost ground with a PCI of -6.71, down from -4.89 in April. Rental inflation eased to 1.9 per cent per annum in May, which is weaker growth than in previous months, but was still stronger than at any other time since the end of 2008, Mike Pero Mortgages and Infometrics said.

Infometrics forecast in August last year that house prices would rise by 24% over the next three years.

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1 Comments

by Bernard Hickey | 18th Jun 10, 8:14pm 1276848892

Slowhand,

Many thanks for your detailed and considered comment.

I hope the above story hasn't betrayed my bias in a painful way that distorts the information in the story. A commenter above mentioned this was simply a rewrite of a press release and he/she is right.

But you're quite right, I do have a point of view. That is that housing in many parts of New Zealand is over-valued relative to people's incomes for all sorts of reasons, including the supply side ones you mention.

I'm very keen to find ways to make housing affordable again for my kids. That may mean less restrictive land release policies by councils, reduced bureaucracy costs, less crazy bank lending policies, higher interest rates and fewer tax incentives for property.

You are right we're unlikely to have a collapse. But I see a drift lower, particularly in real terms. I still reckon prices will fall 15% below their peak. But that's not the collapse seen elsewhere. It will take years.

I'm glad you come here for information and lots of it. I'm proud of what we've done at interest.co.nz with respect to providing lots of information. Some times it's too much, but it's hard to argue we don't have news, information and tools and all we have is bias. We have lots of everything.

Here's a few charts that help tell the story.

http://www.interest.co.nz/charts/real%20estate

http://www.interest.co.nz/charts/interest%20rates

http://www.interest.co.nz/property/home-loan-affordability

http://www.interest.co.nz/charts/real-estate/homeloan-affordability

Here's many articles.

http://www.interest.co.nz/property

Here's everything on mortgage rates

http://www.interest.co.nz/borrowing/mortgages

Here's all our calculators.

http://www.interest.co.nz/calculators

I think we have the most comprehensive set of data on house prices, lending, interest rates, affordability and the economy in New Zealand.