Economists split on whether property boom is over or slowing

By NZPA

Friday 17th September 2004

A slip in the median price for New Zealand homes in August has economists split on whether it heralds the end of a property boom that has gripped the nation.

Real Estate Institute (Reinz) figures out yesterday showed the median house price in August was $247,000, down $2000 on July.

It was the first time property prices had stopped rising since the property boom took off three years ago.

Reinz national president Howard Morley said the dip was driven by increased demand for affordable properties and slower activity in the market's "upper end".

Bank of New Zealand economist Craig Ebert said the figures confirmed a number of the boom's drivers were no longer present and that the market appeared to be losing steam.

Net migration was slowing, while the interest rate environment was increasing, he said.

"There are definitely signs that the market is peaking," he said.

It was taking slightly longer to sell a house, 31 days in August, against 25 days in the same month last year.

Also, the annual rate of growth in the property market had slipped from about 20% earlier this year to about 15% in the 12 months to August 31.

"The market's going from being very heated to apparently better levels of supply and demand," he said, noting the monthly median prices figures were subject to volatility.

Deutsche Bank senior economist Ulf Schoefisch said that Reinz figures confirmed the property boom was over. "We estimate that underlying house price growth has slowed close to zero."

He warned that a slide in house prices could be coming, although prices would stabilise in some areas but drop in others.

Ebert said it was unlikely the changing property market would dissuade the Reserve Bank from tightening monetary policy again this year.

The official cash rate is at 6.25% and the market is already factoring in the likelihood of rises in October and December.

Meanwhile, Morley said although he prices had levelled off, the rising trend was still intact.

"Of the 11 regions, seven reported increases (five last month) two recorded falls (five in July) and two were unchanged (one in July).

"The impact of the Auckland market on the national market was again apparent with Auckland being one of the two regions to record a decrease with its median".

The median Auckland house price fell from $340,000 in July to $336,500 in August.

Sales volumes had improved again in August as the market headed into its customary spring upturn.

There were 7802 houses sold in July compared to 8191 in August.

Auckland accounted for most of the increase with sales up from 2609 in July to 2888 in August.

Median sales prices for August in other regions were: Northland $195,000 (from $183,500); Waikato, Bay of Plenty, Gisborne $210,000 ($200,000); Hawkes' Bay $211,500 ($190,000); Manawatu, Wanganui $140,000 ($140,000); Taranaki $161,050 ($176,500); Wellington $265,000 ($265,000); Nelson, Marlborough $270,000 ($262,000); Canterbury, Westland $218,750 ($216,000); Otago $183,000 ($180,000); and Southland $126,750 ($118,000).

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