House price growth knocked by migration fall, interest rates
13 March 2006
By SUE ALLEN
Fewer new migrants needing homes and rising interest rates mean the chickens may have come home to roost for the slowing housing market, the country's valuations agency says.
Quotable Value figures for February showed property prices grew 15.3 per cent in February, down from 16.8 per cent in January. Overall, house price growth was easing off in most areas, spokesman Blue Hancock said.
The average national sale price for February rose to $324,063 from $321,155, in January. The average price for a house in central Wellington was $428,218 last month, down from $433,546 in January.
"The Wellington area is starting to show signs of easing, the only exceptions seem to be the lower-priced locations which are still selling strongly," QV's Max Meyers said.
Mr Hancock said it looked like the chickens had come home to roost for the housing market, as falling migration, rising interest rates and a slowing economy kicked in.
However, the figures had suggested a similar slowdown last October and things had taken off again.
"But this time we've been going round the country and more people are saying they are seeing less sales activity, so maybe that is starting to come through in the stats."
Last year, house prices in Auckland, Christchurch and Wellington were overtaken by regional centres playing "catch-up", but growth in prices in the regions has also slowed.
Last month, Christchurch house price growth dropped to 17.5 per cent from 20.8 per cent growth in January, Wellington dropped from 13.3 per cent to 13 per cent and Auckland dropped from 11.4 per cent to 10.5 per cent growth.
Meanwhile, strong performers such as Hamilton fell from 26 per cent growth in January to 25.4 per cent for the February year.
Growth in prices in Wanganui, Whangarei, Gisborne and Palmerston North also slowed last month.
Of the major provincial cities, Rotorua led the way with 32 per cent growth in February, up 1 per cent.
Reserve Bank figures show that for the first time in five months home lending growth had dropped back. Banks and lending institutions have $121 billion out on house loans.
Reserve Bank governor Alan Bollard held interest rates at 7.25 per cent on Thursday, but continued to warn that rates would not be cut before the end of the year.
In his monetary policy statement, Dr Bollard warned that New Zealanders needed to be realistic about pay demands.
"We also still need to see housing markets continuing to slow."
Rapidly rising house prices have been one of the biggest drivers of the New Zealand economy as people have borrowed against their homes to invest in new cars, boats and other big ticket items. In turn, that has fuelled inflation.
Despite Dr Bollard's tough talk, economists are predicting interest rates will drop in September as the economy continues to slow.
Mr Hancock said an average 15.3 per cent rise in house prices was still very strong and though the growth rate had dropped slightly, the decrease was not at a level that suggested a dramatic change in the housing market.
But with data showing house prices usually doubled every 10 years on a compounding basis, growth at current levels was unlikely to be sustained.
Mr Hancock said the biggest growth in house prices was still in areas where house prices were below the national median, places such as Otorohanga (48.7 per cent), Waitomo (41.7 per cent) and Wairoa (39.4 per cent).
13 March 2006
By SUE ALLEN
Fewer new migrants needing homes and rising interest rates mean the chickens may have come home to roost for the slowing housing market, the country's valuations agency says.
Quotable Value figures for February showed property prices grew 15.3 per cent in February, down from 16.8 per cent in January. Overall, house price growth was easing off in most areas, spokesman Blue Hancock said.
The average national sale price for February rose to $324,063 from $321,155, in January. The average price for a house in central Wellington was $428,218 last month, down from $433,546 in January.
"The Wellington area is starting to show signs of easing, the only exceptions seem to be the lower-priced locations which are still selling strongly," QV's Max Meyers said.
Mr Hancock said it looked like the chickens had come home to roost for the housing market, as falling migration, rising interest rates and a slowing economy kicked in.
However, the figures had suggested a similar slowdown last October and things had taken off again.
"But this time we've been going round the country and more people are saying they are seeing less sales activity, so maybe that is starting to come through in the stats."
Last year, house prices in Auckland, Christchurch and Wellington were overtaken by regional centres playing "catch-up", but growth in prices in the regions has also slowed.
Last month, Christchurch house price growth dropped to 17.5 per cent from 20.8 per cent growth in January, Wellington dropped from 13.3 per cent to 13 per cent and Auckland dropped from 11.4 per cent to 10.5 per cent growth.
Meanwhile, strong performers such as Hamilton fell from 26 per cent growth in January to 25.4 per cent for the February year.
Growth in prices in Wanganui, Whangarei, Gisborne and Palmerston North also slowed last month.
Of the major provincial cities, Rotorua led the way with 32 per cent growth in February, up 1 per cent.
Reserve Bank figures show that for the first time in five months home lending growth had dropped back. Banks and lending institutions have $121 billion out on house loans.
Reserve Bank governor Alan Bollard held interest rates at 7.25 per cent on Thursday, but continued to warn that rates would not be cut before the end of the year.
In his monetary policy statement, Dr Bollard warned that New Zealanders needed to be realistic about pay demands.
"We also still need to see housing markets continuing to slow."
Rapidly rising house prices have been one of the biggest drivers of the New Zealand economy as people have borrowed against their homes to invest in new cars, boats and other big ticket items. In turn, that has fuelled inflation.
Despite Dr Bollard's tough talk, economists are predicting interest rates will drop in September as the economy continues to slow.
Mr Hancock said an average 15.3 per cent rise in house prices was still very strong and though the growth rate had dropped slightly, the decrease was not at a level that suggested a dramatic change in the housing market.
But with data showing house prices usually doubled every 10 years on a compounding basis, growth at current levels was unlikely to be sustained.
Mr Hancock said the biggest growth in house prices was still in areas where house prices were below the national median, places such as Otorohanga (48.7 per cent), Waitomo (41.7 per cent) and Wairoa (39.4 per cent).