WELLINGTON, Nov 9 (Reuters) - New Zealand house prices advanced for the first time in 16 months in October, with a lack of houses for sale driving prices higher.
Government agency Quotable Value's residential house price index rose 0.2 percent in the year to October, compared with a 1.1 percent decline in September. It was the first increase in values since June 2008 but the trend in property values has been improving now for seventh straight months.
The agency said market activity was well below spring levels, and the price was driven higher by buyers competing for a lower-than-usual number of listings.
"The continued shortage of properties, especially in the main urban areas, is leading to a continued imbalance in the market," QV Valuation Manager Glenda Whitehead said in a statement.
If more listings come to the market to correct the imbalance, that could result in the price growth faltering, Whitehead said.
The housing market, once a major inflationary concern for the Reserve Bank of New Zealand (RBNZ), peaked in late 2007, but fell sharply due to high borrowing costs and prices, while consumers cut spending amid a deepening recession and rising unemployment.
There have been signs of improvement in the market in recent months, on the back of the economy emerging from five quarters of recession in the three months to June with 0.1 percent growth.
The central bank slashed interest rates to a record low 2.5 percent, and has pledged to keep them there until the second half of 2010 to help the economy recover. See
Fixed-term lending rates for two years or longer have gradually risen as investors lock in low rates in the expectation the RBNZ will start raising rates as soon as early next year.
QV said the average sale price rose 0.4 percent to NZ$389,198 ($279,999) between September and October.
House prices in Auckland, the biggest city, were 2.5 higher in October from a year earlier, compared with a 0.6 percent rise in September, while the capital, Wellington, was up 1.6 percent after a 1.1 percent rise the month before.
The monthly residential price report is based on sale prices of properties over the past three months compared with sales over the same period a year earlier. The data is not seasonally adjusted.
Industry data from the Real Estate Institute of New Zealand for the month is due on Friday.

($1=NZ$1.39)

(Reporting by Adrian Bathgate; Editing by Mark Bendeich)

((adrian.bathgate@reuters.com; +64-4-4714233; Reuters Messaging: adrian.bathgate.reuters.com@reuters.net)) Keywords: NEWZEALAND ECONOMY/HOUSING (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com)

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