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House-price growth eases

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  • House-price growth eases

    House-price growth eases
    09 October 2006

    The growth in house prices has slowed for the eighth consecutive month but the refinancing of a $40 billion "wave" of home loans in the next few months may reverse that.

    The average national price for the three months to September was $344,748, according to Quotable Value. That is 1.2 per cent higher than the $340,473 average for the three months to August.

    Nationally, house prices were 10.4 per cent higher in the latest quarter compared with the same period last year.

    They were 10.5 per cent higher in the three months to August than in the year-ago period. The growth is well behind the peak of 16 per cent growth reached at the start of the year.

    Citigroup economist Annette Beacher said $40 billion in home loans were to be refinanced in the next few months and the big lenders were chasing that business by slashing five-year fixed rates to 7.5 per cent and cutting two-year fixed rates.

    ASB Bank and Westpac cut two-year rates to 7.99 per cent last week, challenging Bank of New Zealand's "unbeatable" rate for the same term.

    BNZ answered by dropping its two-year rate to 7.95 per cent. Two-year rates were about 8.3 per cent a few weeks ago.

    Ms Beacher said people who fixed in late 2004 at 6.9 per cent and 7 per cent would find rates about 1 per cent higher for two-year fixed mortgages.

    She raised the concern that the Reserve Bank's main inflation-fighting tool, raising interest rates, might be less effective if many homeowners chose the five-year fixed rate when refinancing.

    Max Meyers, of Quotable Value Wellington, said buyer interest remained strong in most of the region and properties were still selling well. Increased competition among the banks was expected to support the local Wellington market till the end of the year, he said.

    House-price growth for the region was almost static at 11.9 per cent for the September quarter, compared with 11.8 per cent in the three months to August.

    The average price was $383,719 in the three months to September, up from $376,550 in August. Prices were about $55,000 above the same time last year, Mr Meyers said.

    Price growth dropped in Upper Hutt, Lower Hutt, Porirua and on the Kapiti Coast for the three months to September, compared with August.

    Of the main cities, Hamilton prices rose 14.1 per cent in the September quarter, Auckland 7.2 per cent and Dunedin 5.3 per cent, a slight slowing in growth rates compared with August. Christchurch's growth rate was stable at 9.6 per cent.

    At 10.1 per cent, Wellington City prices grew at a slightly higher rate than August's 9.5 per cent.

    Price growth slowed in Hastings and Napier. Quotable Value spokesman Blue Hancock said the biggest growth was still in the smaller towns.

    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx