Tip­ping point reached

Southern Real Estate Guide - - Property Guide -

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.

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