NZ Home Prices Still Sliding

Source : The Business Times, February 10, 2009

QV's January index falls 8.3% as buyers expect further drops

(WELLINGTON) New Zealand house prices fell for the seventh month in a row in January, with the pace of decline picking up, government agency Quotable Value (QV) said yesterday.

QV's residential house price index fell 8.3 per cent in the year through Jan 31, compared with a 7.4 per cent decline in December. Tentative signs that the decline in the market may be levelling out at the end of last year had proved short-lived.

'Declining interest rates would normally stimulate buyer activity, but concerns over job security, and a more cautious approach to lending by financial institutions seems to be preventing this,' said QV spokesman Blue Hancock. 'Many buyers also appear to be holding back in expectation of further property value and interest rates drops throughout 2009.'

The housing market, once a key inflationary concern for the Reserve Bank of New Zealand (RBNZ), has been falling steadily over the past year because of high borrowing costs and as consumer spending slowed in the face of an economy in recession. The central bank has slashed interest rates by 475 basis points since last July, and is likely to cut rates again at its next review in early March.

The RBNZ has forecast house prices to fall around 16 per cent by the end of 2010 from their peak in 2007. -- Reuters