New Zealand's property market is forecast to slump further

The Treasury's economic outlook for the year, released in today's budget, forecasts a shrinkage in residential investment of 25% for the year to March and a further 23% contraction the following 12 months.

"There have been signs of a slight recovery in house sales over April, but...it is unlikely that the housing market will stage a significant recovery any time soon, with the risks tilted towards further declines in house prices as 2009 progresses."

The Treasury outlook forecast house prices to fall 8% for the year to March 2010 and a further 4% the following year. This follows a 9% contraction in the 12 months to March this year.

On top of this, banks are taking a tougher approach to risk, requiring higher deposits than they were a year ago.

"Funding for property developers remains constrained."

Although the drops in interest rates are expected to have some counterbalancing effect, the expectation is that people will use the headroom provided to pay off existing debt. There has also been an increase in "precautionary saving" in more uncertain economic times.

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.

Related News:

NZ budget gets tick from S&P, 'sound public finances' support AA+ debt rating
Indexation loss tightens screws on Working for Families
Government cuts tax on savings vehicles to 28%
Government closes loophole and aligns tax rates for LAQCs
Property depreciation write-offs: here today, gone tomorrow
Recovery gives NZ tailwind to rebalance economy, cut taxes
Finely balanced tax package depends on growth dividend
Biggest tax package in a generation builds on lessons of global crisis
Budget a success: S&P revises ratings outlook to 'stable'
[BUDGET 2009] Productivity, vision take back seat as English delivers debt-control budget