House prices still sliding

Reuters | Monday, 08 September 2008

New Zealand house prices fell in the year to August as the economy slowed and are likely to fall further before recovering, government agency Quotable Value (QV) says.

QV's residential house price index eased 4.5 percent in the month from a year earlier, its second monthly decline in a row, after a 2.2 percent fall in July and a 0.1 percent gain in June.

QV Valuations' Blue Hancock said a number of properties were selling at reduced prices as sellers adjust their expectations.

"Many buyers are realising that price decreases are making this a good time to buy, and that they can bargain strongly. As a result there will be further declines in value before the market levels out," Hancock said in a statement.

The housing market, once a key inflationary concern for the Reserve Bank of New Zealand, has been easing through this year in the face of high borrowing costs and as surging food and oil prices crimp consumers' spending power.

The RBNZ cut its official cash rate by a quarter point to 8 percent last month, with the economy widely seen in a recession.

The latest Reuters poll has all 17 economists expecting a another cut at the next meeting on Sept. 11, with a majority picking rates to fall to 7.25 percent by the end of the year.

QV said house prices in Auckland, the biggest population and commercial centre, fell 6.7 percent from a year ago compared with a 5.1 percent drop in July, while the capital, Wellington, fell 2.9 percent after a 1.2 percent drop the month before.

The QV data showed the average sale price for New Zealand houses fell 0.5 percent to $391,487.

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.