New Zealand Home Prices Down Sharply In October

Source : The Business Times, November 11, 2008

(WELLINGTON) New Zealand house prices fell sharply in the year to October, reflecting an economy in recession and caution in the market, government agency Quotable Value (QV) said yesterday. QV's residential house price index fell 6.8 per cent in the month from a year earlier, its fourth monthly decline in a row, after a 5.8 per cent drop in September and a 4.5 per cent fall in August.

Sales volumes were unusually low, reflecting widespread caution in the market, said QV's Blue Hancock. 'Many buyers and sellers are waiting to see any impact from the financial crisis, dropping interest rates and the election before committing to property transactions,' Mr Hancock said in a statement.

New Zealand held its general election on Saturday, although the outcome is seen as having little impact on the broader economy and markets. The housing market, once a key inflationary concern for the Reserve Bank of New Zealand, has been falling steadily through this year in the face of high borrowing costs and as surging food and oil prices crimp consumers' spending power. The RBNZ has cut its official cash rate by a total of 175 basis points to 6.5 per cent since July as the New Zealand economy entered its first recession in a decade in the first half of the year.

The latest Reuters poll has 14 of 16 economists expecting a cut of 50 basis points at the next meeting on Dec 4, with interest rates picked to be 5 per cent by the middle of 2009.

QV said that house prices in Auckland, the biggest population and commercial centre, fell 7.7 per cent from a year ago compared with a 7 per cent drop in September, while the capital, Wellington, fell 6.1 per cent after a 5.4 per cent drop the month before. The average sale price for New Zealand houses was virtually unchanged at NZ$379,290 (S$339,00).

The monthly residential price report is based on sale prices of properties over the past three months compared with sales over the corresponding three-month period a year earlier.

The data is not seasonally adjusted. -- Reuters