Will prices in new zealand fall further?

That´s the question facing most people considering buying or selling property in New Zealand in 2009...

Around 70 per cent of New Zealand´s new wealth is invested in the country's residential property sector, which is estimated to be worth in the region of £233 billion.

However, following a decade of year-on-year capital growth, average residential property prices in New Zealand fell by four per cent last year, according to the Real Estate Institute.

Furthermore, sales volumes in 2008 suffered, as demand depreciated by approximately 60 per cent, compared to peak demand in 2003, which concerns economists more than actual prices because one eventually follows the other.

The number of days-to-sell is another forward-looking measure economists take into consideration. Another comparison with November 2003 further highlights the shift in the market.

In 2003, statistics compiled by the Real Estate Institute showed that it took an average of 24 days to sell a home in the country. Five years later, that more than doubled to 44 days. Some experts believe that this indicates that a big price free-fall is now on the agenda, with some so-called experts projecting price falls of up to 30 per cent in 2009.

Even the conservative Reserve Bank monetary policy statement out in December 2008 was rather pessimistic.

"Further downward adjustment from current overvalued prices is expected over the coming year or so with next to no recovery of substance over the remainder of the projection.

"From their peak in 2007, nominal house prices are projected to fall 16per cent by the end of 2010 or 24 per cent in real terms, slightly more than was projected in the September statement.

"Such moderation would bring house prices to a level more in line with fundamentals. There is a risk of house prices falling by more than this," the bank said.

One economist went much further.

"Housing hell", wrote Rodney Dickens, a leading economist who once worked for Commonwealth Bank of Australia, looking at 2009 and beyond.

"The average rental income will have to increase 71 per cent or the median house price will have to fall 42 per cent," he said, if historical average rental yields of 7.7 per cent on residential property were to apply.

"Or, more likely some combination of the two will unfold."

There can be no doubt that New Zealand residential property market faces another tough year ahead, but prices are now potentially at a "cyclical low and some improvement is likely before the middle of 2009", says a far more optimistic, Tony Alexander, BNZ Chief Economist.

So, when to buy?

Robin Clements, Senior Economist at UBS NZ, believes that the residential market in New Zealand will bottom out this year.

Source: www.homesoverseas.co.uk/news