Nz: 'downward drag' hits prices

House prices in New Zealand could fall up to 10 per cent in the coming months, an economist  has warned...

Data from REINZ, the Real Estate Institute of New Zealand, showed the housing market continued to weaken, with February sales the lowest since March 2001, and the time taken to sell a house up significantly.

The national median price for February eased back from $340,000 in January to $337,500 last month, and just 0.7 percent ahead of the February 2007 median of $335,000.

REINZ said the residential property market had reached a "tipping point", with the annual price growth rate on the verge of moving into negative figures.

Drag on the economy

Deutsche Bank chief economist Darren Gibbs agreed. "Whilst the median price rose 0.7 percent year on year in February, in our view a negative annual growth rate will almost certainly be recorded from next month onwards."

“February prices in Auckland have already fallen 0.7 percent year on year, and the number of listings is now high compared with sales, highlighting a clear downward pressure on prices for the third month in a row.

“Given the current high interest rates, I expect even weaker readings over the coming months, which would be a substantial drag on the economy, despite booming dairy sector incomes and the likelihood of personal tax cuts before year end".

REINZ president Murray Cleland was not as pessimistic: ”Around the 12 real estate regions the pattern is unclear, and with six median price rises and six falls, it is not yet conclusively proven that the housing market has gone into retreat”.