House prices to fall 10% - bank
5:00AM Thursday March 13, 2008
House prices could fall up to 10 per cent in the coming months, an economist warned after data released yesterday showed the market is continuing to weaken.
The Real Estate Institute of New Zealand data showed February sales were the lowest since March 2001.
The national median price for February eased back from $340,000 in January to $337,500 last month, and just 0.7 per cent ahead of the February 2007 median of $335,000.
REINZ said the residential property market had reached a "tipping point", with the annual price growth rate on the verge of moving into negative figures .
Deutsche Bank chief economist Darren Gibbs agreed.
"Whilst the median price rose 0.7 per cent year on year in February, in our view a negative annual growth rate will almost certainly be recorded from next month onwards."
He noted February prices in Auckland had already fallen 0.7 per cent year on year.
Mr Gibbs said the number of listings was now high compared with sales, highlighting "clear downward pressure on prices" for the third month in a row.
Given the current high interest rates, he expected even weaker readings over the coming months, which would be a "substantial drag on the economy, despite booming dairy sector incomes and the likelihood of personal tax cuts before year end".
House sales for February rose to 6356 from 5186 in January but were well behind sales the year before of 9357.
However, on a seasonally adjusted basis, Mr Gibbs said they fell by nearly 8 per cent from January , and were 36 per cent lower than a year earlier.
Sales in Auckland, "where prices and leverage are greatest", were down around 12 per cent on the previous month and 46 per cent on the previous year.
Mr Gibbs said the current turnover of houses was below the historical average by around 30 per cent, after demographic adjustments.
The median time taken to sell houses rose one day to 50 days in February, or almost three days to 43.5 days on a seasonally adjusted basis.
That was the highest level since February 2002, Mr Gibbs said. He expected the time it takes to sell a house to rise "substantially" in coming months.
Mr Gibbs said the housing market was falling faster than even recent Reserve Bank expectations, and he thought house prices could fall by 10 per cent, not the 5 per cent the bank is forecasting.
He expected the official cash rate would be cut late this year, noting that while dairy returns and possible tax cuts were providing inflationary headaches in the short-term, housing and global economic and finance market developments could bring down inflation in the long-term.
REINZ president Murray Cleland said it was not yet conclusively proven that the housing market had gone into retreat.
Around the 12 real estate regions the pattern was unclear, with six median price rises and six falls, he said.
GOING DOWN?
The median house price in February was just 0.7 per cent higher than a year ago
Forecasters believe prices have reached a tipping point and will drop soon
The Reserve Bank predicts a 5 per cent fall this year
Deutsche Bank is picking 10 per cent
- NZPA
5:00AM Thursday March 13, 2008
House prices could fall up to 10 per cent in the coming months, an economist warned after data released yesterday showed the market is continuing to weaken.
The Real Estate Institute of New Zealand data showed February sales were the lowest since March 2001.
The national median price for February eased back from $340,000 in January to $337,500 last month, and just 0.7 per cent ahead of the February 2007 median of $335,000.
REINZ said the residential property market had reached a "tipping point", with the annual price growth rate on the verge of moving into negative figures .
Deutsche Bank chief economist Darren Gibbs agreed.
"Whilst the median price rose 0.7 per cent year on year in February, in our view a negative annual growth rate will almost certainly be recorded from next month onwards."
He noted February prices in Auckland had already fallen 0.7 per cent year on year.
Mr Gibbs said the number of listings was now high compared with sales, highlighting "clear downward pressure on prices" for the third month in a row.
Given the current high interest rates, he expected even weaker readings over the coming months, which would be a "substantial drag on the economy, despite booming dairy sector incomes and the likelihood of personal tax cuts before year end".
House sales for February rose to 6356 from 5186 in January but were well behind sales the year before of 9357.
However, on a seasonally adjusted basis, Mr Gibbs said they fell by nearly 8 per cent from January , and were 36 per cent lower than a year earlier.
Sales in Auckland, "where prices and leverage are greatest", were down around 12 per cent on the previous month and 46 per cent on the previous year.
Mr Gibbs said the current turnover of houses was below the historical average by around 30 per cent, after demographic adjustments.
The median time taken to sell houses rose one day to 50 days in February, or almost three days to 43.5 days on a seasonally adjusted basis.
That was the highest level since February 2002, Mr Gibbs said. He expected the time it takes to sell a house to rise "substantially" in coming months.
Mr Gibbs said the housing market was falling faster than even recent Reserve Bank expectations, and he thought house prices could fall by 10 per cent, not the 5 per cent the bank is forecasting.
He expected the official cash rate would be cut late this year, noting that while dairy returns and possible tax cuts were providing inflationary headaches in the short-term, housing and global economic and finance market developments could bring down inflation in the long-term.
REINZ president Murray Cleland said it was not yet conclusively proven that the housing market had gone into retreat.
Around the 12 real estate regions the pattern was unclear, with six median price rises and six falls, he said.
GOING DOWN?
The median house price in February was just 0.7 per cent higher than a year ago
Forecasters believe prices have reached a tipping point and will drop soon
The Reserve Bank predicts a 5 per cent fall this year
Deutsche Bank is picking 10 per cent
- NZPA
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