Housing market downturn gathers speed

AUCKLAND: The downturn in the housing market is close to the fastest rate in nearly 14 years.

CoreLogic’s House Price Index, which measures changing property values, indicates the pace of decline is picking up, values falling another 1.8% last month, twice the rate of July’s 0.9% drop.

CoreLogic head of research Nick Goodall said the threemonth fall of 3.5% was heading to depths seen in the Global Financial Crisis in August 2008, when annual values fell 4.4%.

Expensive and restrictive credit conditions were driving the market downturn, which could be seen throughout the country, he said.

Reduced demand for mortgages was driving interestrate competition between banks.

‘‘The already smaller pool of wouldbe buyers, due to tighter, more expensive credit, are happy to bide their time in the falling market,’’ Mr Goodall said.

Wellington was the first major centre to drop into negative territory last month, but August’s annual figures showed Auckland, Dunedin and other main urban areas had now joined it.

Christchurch was proving more resilient, values still 16% up on the same time last year.

‘‘Consumer sentiment has shown signs of bottoming out, probably helped by recent falls in shortterm interest rates and whispers of a market trough approaching for some markets,’’ Mr Goodall said.

‘‘The borrowing environment remains tough, though, and along with stretched affordability off the back of increasing interest rates, a firm bounceback in values is not expected.

‘‘The market is so linked to interest rates, to affordability.

‘‘So I suppose the one green shoot is perhaps there’s expectation that interest rates are close to peak and as soon as they do hit peak and start to drop again, maybe next year, then there is a chance that these values will stop falling.

He said he was ‘‘not expecting a significant bounceback by any means’’, but there were things on the horizon which suggested prices might stop falling, perhaps later this year and into next year.

More properties generally went on the market in spring, and with higher supply prices were less likely to grow, but the key things were sentiment and people’s expectations, he said.

‘‘Sometimes we can talk ourselves into a downturn but we can also talk ourselves into that upturn as well, so that’ll be an interesting one to watch.’’

A strong labour market, with low unemployment, was helping homeowners with rising mortgage repayments.

Credit arrears remained low according to credit agency Centrix and the Reserve Bank.

Mortgagee sales also remained low, and well below the peak of 777 in three months ended June 2008. — RNZ