Property affordability improves as loan costs fall

Monday 24th November 2008

Property affordability in New Zealand has improved though a quick rebound in the market isn't anticipated, according to the ANZ Property Focus.

The bank's property gauges show affordability is improving though it is "a slow grind down," the bank said in its report. Costs for servicing a home loan remained high, and rising, according to the November report. Consents and house sales were at "rock bottom," levels not seen for 15 years.

The bank reiterated its advice that those seeking a mortgage should aim to fix for just six to 12 months because of the prospects of further rate cuts by the Reserve Bank of New Zealand. It predicts a 100 basis point cut to the official cash rate next week, pushing the OCR down to 5.5%, amid signs of a prolonged economic slump.

"The economic picture is still one of weakness despite the RBNZ moving aggressively," ANZ bank said. "Critical now for both the economy and the housing market will be the state of the labour market and how high the unemployment rate gets."

Reserve Bank Governor Alan Bollard has embarked on his steepest easing cycle since the OCR was introduced in 1999 to help revive an economy that may have contracted at least three quarters in a row.

Home-building approvals rose in September a seasonally adjusted 8.4%, though this mainly reflected a gain in consents for apartments. Excluding apartments, consents fell 0.8%.

Fletcher Building, the biggest construction company on the NZX 50 Index, rose 1.9% to $5.52 today. Fletcher has declined 54% this year.

By Jonathan Underhill

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