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    Sep 2003
    High up above and deep down under

    Default HB property bubble tipped to burst

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    HB property bubble tipped to burst

    21.05.2004 - Hawkes Bay Today

    The Hawke's Bay property market bubble could be about to burst, a new research report warns.

    The Infrometerics overview of the New Zealand property market trends, prepared for PMI mortgage Insurance, comes within days of the revelation that the median selling prices of houses in Napier and Hastings have reached record levels.

    The regional median price for April climbed to $210,000, a rise of $85,000 in four years. In Napier the median reached $241,000 and in Hastings $210,000. But the Infrometrics report says that total house sales in the region, which have been bucking the national trend, had peaked.

    Sales were up 80 percent on the low point of 2001 but the overview said the climb in sales had not been as large as the lift nationwide. However, it was significant, given the relatively stable level of activity that prevailed between 1994 and 2002. House price growth climbed to 54 percent a year in February.

    The strength in the Hawke's Bay property market was at odds with the region's continued slow rate of population growth , which suggested that much of the housing boom should have passed the area by.

    It noted Hawke's Bay's population grew 0.3 percent last year and the same level was anticipated over the next three years.

    Property values in parts of the region may have benefitted from a step up in demand for coastal land.

    The overview said the slide in sales would also be reflected in price movements and it was predicting an 8.8 percent drop in property values over the year to June 2005, and that by June 2006, nominal house prices will still be below the levels reached in at the end of 2003.

    The number of houses sold in the region is expected to reach 4236 this year, almost double the level of 2001.

    It said stagnant property values would result in the rate of construction quickly being scaled down from its current high level.

    It said although the growth in residential consents have been running faster than the national average, Hawke's Bay's figures would fall more quickly than the the New Zealand total between 2004 and 2006.

    The number of new homes in Hawke's Bay this year were forecasted to reach 655, around the peak of 1994.

    However, consents for new homes are predicted to fall to 395 in 2006.

    The report said average rents in Hawke's Bay increased 12 percent in the year to January but gross yields in the region had fallen significantly over the past 18 months, from 6.9 percent to 5.5 percent, as house prices climbed.


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