The recent recovery in the housing market highlighted by the REINZ March data is "not a flash in the pan that will fade," and may mark the start of housing market recovery, according to BNZ economist Tony Alexander.
In his Weekly Overview Alexander says the market is seeing an upturn led primarily by a shortage of houses, especially in Auckland, where sales rose 10.5% in March and 11.5% over the March quarter.
"As regular readers will know my fundamental view is that there is a shortage of dwellings in New Zealand and that this shortage is greatest in Auckland. Therefore I don't believe the strength we have seen in March is a flash in the pan that will fade. The chances are these are the first decent signs of the cyclical upturn in the housing market getting underway."
Alexander said he believes prices will begin to increase in response to the combination of rising sales and constrained supply - but that the increases may not be seen for some time.
"In the used house market there are many vendors who upon seeing the discussion about a strengthening market will bring their properties to market," he said.
"That will mean a rise in listings so sought after by real estate agents. Those listings will likely keep price gains suppressed for the next few months. But eventually as the excess stock is soaked up by buyers we will see prices rise - initially in Auckland then in other parts of the country with a lag."
"All up it looks like the housing market is turning but the evidence is not in hand to allow one to say that buyers are jumping in boots and all. That will come much later. Before we get there there will be some waves of passive sellers to get through."