Excerpt from ANZ Press Release, dated 20 August 2007

The majority of regions are now shifting to a position of
excess supply. REINZ housing market data shows housing market
activity is moderating. Median house prices have fallen for the
second consecutive month, house sales continued their trend
lower, and days to sell ticked up slightly. The previous tight
market has been a consequence of both strong demand and tight
supply conditions. But interest rate hikes are likely to see
demand slow. The question is whether tight supply will continue
to support the market, or will the Reserve Bank get the
sustained slowing they desire. We monitor two simple gauges to
highlight supply-demand balance within the property market, and
across the regions.

• The ratio of consents (supply) to economic
growth within a region. If consents are
growing faster than demand growth within the
region, it is indicative of excess supply, and of
course the converse applies.
• The ratio of house sales to consents.
Another supply-demand balance measure, with
an up-tick in the ratio indicating excess
demand, and a fall below trend suggesting a
supply glut pending.
Across the regions, we note the following:
• Auckland remains the national hot-spot
although conditions have eased since last
quarter. The ratio of consents to GDP remains
below trend (too little supply), while the ratio of
sales to consents did fall, but remains indicative
of still strong demand.
• Our demand-supply indicators suggest roughly
balanced conditions in Northland, Waikato and
Canterbury.
• The majority of regions are now showing early
signs of a market that is set to move in the
favour of buyers. The ratio of consents to GDP
has been trending up in Gisborne, Taranaki,
Hawke’s Bay, Manawatu, Nelson/Malborough
and West Coast. Wellington also experienced a
sharp shift to excess supply conditions in the
quarter. In these same regions, the ratio of
house sales to consents has fallen below the
historical average.
Only the Auckland region is still clearly facing
significant excess demand conditions. The majority
of other regions look to be showing pending excess
supply conditions relative to demand. The tight
demand-supply balance that has been supportive of
the housing market for some time finally looks to
be turning. Ultimately, this suggests that house
price growth, which has already softened recently,
will continue to moderate over the year ahead.

Source: ANZ Market Focus

COLIN KUMAR
Barfoot & Thompson Commercial
m. 64 27 684 1114 | p. 649 358 0989
c.kumar@barfoot.co.nz

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