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Property sales record slump in first half: QBE LMI

Tuesday 18th November 2008

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The volume of New Zealand house sales had a record slump in the first half of 2008 as high interest rates and soaring household costs sapped demand for property, Infometrics said in a report prepared for QBE Lenders' Mortgage Insurance.

Property sales tumbled 44.3% versus the same period in 2007, according to the QBE LMI Residential Property Overview. That exceeds the previous record 39.4% decline in the second half of 1974. Sales may revive after the central bank embarked on its steepest easing cycle since introducing the official cash rate in 1999 while fuel and food costs have abated.

"With interest rates on the way down, a pick up in business and consumer confidence, and vendors revising their price expectations, sales volumes are expected to recover from their current low level," QBE LMI chief executive Ian Graham said in a statement. "More buyers are likely to be drawn back into the market in 2009-2010 in search of housing bargains."

The New Zealand economy tipped into recession in the first half of the year and economists such as Goldman Sachs JBWere's Shamubeel Eaqub predict the contraction will extend into 2009, spurring the central bank to extend its rate cuts. Last week Fletcher Building, New Zealand's largest construction company, predicted annual profit will drop as much as 38%.

The nation's median house price has been declining since 2007, led by weaker prices in Christchurch, Hawke's Bay and Taranaki/Manawatu/Wanganui regions in the year ended June 30, according to today's report. The average price nationwide fell 3.1% in the three months ended August 31 from the same period of 2007.

Annual growth in the median house price could dip as low as minus 10%t in early 2009 and "nationally, prices are forecast to fall 5.8 per cent by June 2009," said Gareth Kiernan, Infometrics Senior Economist.

In the rental property market, gross rental yields rose to 4.7% in August from as low as 4.3% in May 2007 and are currently at their highest in over three years, according to the report.

By Jonathan Underhill

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