Nz market 'screeches to a halt'

NZ House sales have crashed by an incredible 30% in the last year…

Prices are expected to fall 5% this year and remain flat for the next five years, according to economists from Westpac', who say residential property prices have "screeched to a halt, with essentially zero price movement in the past eight months".

Prices stopped dead in April last year, they say, after rising by $8000 a month. Had it not been for New Zealand's strong economy, wage growth and a 21-year unemployment low, house prices would have fallen earlier and more aggressively.

Rents are forecast to rise 6 per cent a year as would-be first-home buyers avoid home ownership, deterred by high interest rates and the chance that fixed rates may drop slightly by mid-year. These people can afford to pay higher rents.

At the same time, supplies of fresh rental stock will fall as high interest rates discourage investment in rental property and investors who've borrowed heavily bail out of the market.

Tony Alexander, the BNZ's chief economist, commented:  â€œFor the first time in four years I believe prices will fall probably about 1 - 2 per cent. I’m not expecting anything like the 4 -5 per cent fall in house prices in 1998, on the back of a recession, net migration outflows, high interest rates, a two-year drought, the Asian crisis and a 1.7 per cent rise in unemployment. Of those factors, the only one present right now is high interest rates.