New Zealand House Sales Fall 33% From Year Earlier

By Tracy Withers

Aug. 12 (Bloomberg) -- Sales of New Zealand houses fell 33 percent from a year earlier in July as record-high interest rates curtailed demand for property.

The number of homes sold dropped 33 percent to 4,489 from 6,660 a year earlier, according to a report from the Real Estate Institute of New Zealand Inc. e-mailed to Bloomberg News today. Sales rose from a 16-year low of 4,305 in June.

Slowing consumer spending and a plunge in the housing market tipped New Zealand's economy into a recession in the first half of this year, prompting Reserve Bank Governor Alan Bollard to cut interest rates last month. Turnover in the property may be steadying, adding to signs that the economy will begin to recover later this year, said economist Darren Gibbs.

``Activity levels probably bottomed in May and will gradually increase,'' said Gibbs, chief economist at Deutsche Bank AG in Auckland. ``It looks as though prices are holding as well, which is a little surprising.''

The median house price dropped 1.5 percent from a year earlier to NZ$340,000 ($236,880). Prices were unchanged from June. The median time it took to sell a house increased to 58 days from 53 in June.

Sales may rise because sellers are prepared to accept more realistic prices in order to complete a deal, Gibbs said.

Job Security

The housing market may recover as Bollard continues to cut interest rates, though much will depend on how the slowdown in the economy feeds through into the labor market and job security, he said.

The jobless rate rose to 3.9 percent in the second quarter, the highest in more than two years, making consumers more reluctant to take out housing loans.

The institute said the increase in sales from June and an unchanged median price suggests the property market is steadying.

``The trend-line is certainly not deteriorating as much as some would have you believe,'' said institute President Murray Cleland. ``If this is as bad as it gets, then perhaps the market is in better shape than we thought.''

In Auckland, the nation's largest city, sales fell 42 percent and the median price declined 5.4 percent.

``It is not surprising that Auckland is finding itself very much at the epicenter of the economic recession, and it is understandable that confidence in the Auckland residential market is pretty low,'' said Cleland.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.