NZ House Sales Slump To 26-Year Low

Source : The Business Times, September 11, 2008

(WELLINGTON) Sales of New Zealand houses fell to a 26-year low last month as interest rates close to a record curtailed demand for property.

Weak demand: The median house price last month fell to NZ$330,000 from NZ$350,000 a year earlier - a drop of 5.7 per cent

The number of homes sold dropped 34 per cent to 4,220 last month from 6,394 a year earlier, according to a report from the Real Estate Institute of New Zealand Inc.

The median house price dropped 5.7 per cent.

Slowing consumer spending and a plunge in the housing market tipped New Zealand's economy into a recession in the first half of this year, prompting Reserve Bank governor Alan Bollard to cut interest rates for the first time in five years in July.

The central bank will probably cut borrowing costs again today, according to all 15 economists surveyed by Bloomberg News.

'The underlying fundamentals for housing demand remains weak, with mortgage rates still at high levels,' said Jane Turner, economist at ASB Bank Ltd in Auckland. 'It is tough going for households financially, and they need interest rates to be much lower to provide any real improvement.'

An over-supply of houses in the market will weigh on prices, she said.

Buyers are staying on the sidelines, forcing vendors to either take their property off the market or accept a lower price.

'Economists are on the money with predictions of a 5-10 per cent decrease' in prices, said Murray Cleland, national president of the institute. 'Much will depend on the Reserve Bank's decision. The expected decrease will take the pressure off mortgage costs.'

The median house price fell to NZ$330,000 (S$316,509) from NZ$350,000 a year earlier. Prices dropped NZ$10,000 from July.

The median time it took to sell a house was 55 days compared to 33 days in August last year. Still, the number of days it took to sell declined from a record-high of 58 in July.

Ms Turner said that wet weather last month may have added to the slump in sales, keeping buyers at home rather than inspecting properties. -- Bloomberg