Leading NZ bank revises property price slide but concerns remain

The Reserve Bank of New Zealand believes that property prices will not fall as much as it had previously predicted despite the number of transactions declining.

Economists had estimated that median residential property prices would fall up to 20% during the recession but have now issued new guidance that it could be nearer 13%.

Governor Alan Bollard said that low mortgage interest rates and higher net immigration had boosted real estate sales earlier this year. However, people had since become more cautious in their spending because financial and housing wealth had been adversely affected lately.

Concerns about job security were prompting more caution and tight credit was also playing a role, he added.

But the biggest concern among property professionals is the lack of sales. Vendors are refusing to accept low prices and many are delaying putting their property on the market unless they have to.

According to Mike Elford, president of the Real Estate Institute of New Zealand, the main problem in the market it a severe shortage of supply. With an apparent reluctance to sell in what is perceived to be a buyers' market, people are tending to hunker down and sit tight on their properties.

'This, combined with a seasonal trend for people to hibernate rather than put their home on the market in the winter months, has led to an acute shortage of houses on the market,' he said.

He predicted more sales in the spring. 'Traditionally, people start thinking about selling around August and September as the weather warms up, but until then we expect turnover to remain consistent with the number of properties that are put on to the market,' he added.

NZIER principal economist Shamubeel Eaqub yesterday cited these along with tougher bank lending criteria as reasons why activity was so lacklustre. 'Rising fixed mortgage rates, which traditionally lead house sales by six months, are a clear risk. This is overlaid with the prospect of rising job losses, compounded by potentially stricter enforcement of conservative credit criteria,' he explained.