Tipping point reached
The New Zealand residential property market reached a ‘tipping point’ in February with the percentage annual growth rate on the verge of moving into negative figures, according to the Real Estate Institute of New Zealand (Inc).
The national median price eased back from $ 340,000 in January to $ 337,500 in February, leaving it just 0.74 percent ahead of the February 2007 median of $ 335,000.
“Any further weakening of prices in March will see the market move into a negative percentage which has huge ramifications,” warns national president of the Institute Murray Cleland. “ If prices tip into reverse for the balance of this year that will have huge economic and political implications.
“ Treasury has already begun to talk about the impact of falling property prices while at the same time the Reserve Bank is talking about maintaining the current 8.25 percent Official Cash Rate until 2009.
“ It might be testimony to the independence of the Central Bank, but for a government to be going into an election year with potentially falling property prices and rising mortgage interest rates, is not a good look,” he says.
Mr Cleland says the wisdom of the Reserve Bank having increased the OCR four times in a row last year, having left it unchanged for the 12 months prior, has to be called into question.
“ The overwhelming goal of controlling inflation is recognised, but the cost to the average New Zealander during 2008 could be considerable with reduced household spending as mortgage costs squeeze disposable incomes, while falling prices will leave some with negative equity and the prospect of unhappy conversations with their bank.”
He says the market has yet to conclusively prove that it had gone into retreat and the one heartening aspect of the February figures was the rise in sales from 5186 in January to 6356, “ which given the fact that February is another truncated month, isn’t too bad an effort although still a long way behind the February 2007 sales of 9357.”
While the national median was down, the pattern around the 12 real estate regions was unclear, with six rises and six falls.
Mr Cleland says that a number of the regional price movements haven’t followed a clear trend, partly a result of relatively low sales levels affecting median prices.
Northland’s median was down from $ 328,000 to $ 284,000 while the Auckland region was down from $ 432,750 in January to $ 427,000.
Within the Auckland region figures, both the North Shore and the Auckland City medians rose, North Shore up from $ 495,000 to $ 525,000 which is ahead of the February 2007 median of $ 503,500, while the Auck- land City median was up from $ 433,000 in January to $ 439,500 in February, however this latest figure was down on the February 2007 figure of $ 462,000.
Lower priced apartment sales in February were a likely influence, Murray says.
Further South, the Waikato Bay of Plenty median was up from $ 320,000 to $ 333,000, helped by Hamilton City up from $ 325,000 to $ 360,000, Mount Maunganui and Papamoa jumping from $ 410,500 to $ 470,000 and Tauranga up from $ 341,500 to $ 354,000.
The Hawke’s Bay median was down from $ 280,000 to $ 270,000 and although Napier City was up from $ 292,500 to $ 311,250, Hastings was down from $ 285,000 to $ 260,000.
“As can be seen the trends are not consistent, with no real rhyme nor reason, and the market appears to be moving as much sideways as down, so we will need to see the March and probably April figures to get a clearer feel for the trend for 2008,” Mr Cleland says.
The Manawatu and Wanganui regions median was back from $ 230,000 to $ 225,000 but Taranaki managed a small increase from $ 263,000 to $ 265,000.
The Wellington median was seemingly quite strong, up from $ 366,750 in January to $ 375,800, as was Nelson and Marlborough regions up from $ 340,000 in January to $ 351,750.