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Property values continue to weaken

Monday 9th August 2010

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New Zealand property values continued to weaken last month, with the number of sales sinking to near their lows in 2008, at the height of the recession. 

Values were 4.1% above those of July 2009, compared with a 5.2% decline in the previous month, according to QV. Property values have declined 0.8% since March. 

“We are now seeing more of a ‘do-nothing’ sentiment,” Research Director Jonno Ingerson.

“An increasing number of people appear to be shelving plans to buy houses and are instead focussing on reducing debt. Of those potential buyers that remain active, some are finding it difficult to secure lending from banks, while others feel they are in the driving seat, have time to do their research, and only make sharp offers.” 

The QV data follows Real Estate Institute figures showing the volume of residential property sales fell to the second-lowest volume in a June month in the past decade.

Weighing on demand, banks have tightened lending criteria, high unemployment has prodded more households to reduce debt rather than spend and net migration is tapering off. Added to that, the government ended some tax breaks for property in the May Budget and the central bank has resumed raising interest rates.

“The lack of buyer demand, combined with an increasing supply of unsold houses is causing values to gradually drop,” Ingerson said.

“Some of the home owners and potential buyers we have spoken to remain concerned about potential interest rate rises and job security.” 

He said market activity is likely to remain slow over the coming months and there is a risk the traditional spring uptick in sales turns out to be a fizzer. The average sales price increased to $407,191 from $404,715, reflecting relatively fewer lower value properties selling over recent months. 

Auckland area values rose 6.9% from a year earlier, down from the 7.9% gain in the previous month. Wellington area values are 3.2% above last year, down from the 5.4% in the previous month.

Christchurch values were 4.6% above last year, little changed from the previous month. Dunedin values rose 3.7%, down from the 5.8% reported last month. 

To find out more about what's happening around the main cities, click here.

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