House prices fall 7.4% in 2008; December sales tumble

Thursday 15th January 2009

New Zealand house prices fell 7.4% last year as the first recession in a decade and tighter lending criteria sapped demand for property. Sales in December tumbled 23% from a year earlier.

The decline is the largest since Quotable Value New Zealand began its series in 2005, according to spokesman Mark Dow. The property figures follow a survey this week showing a slump in business confidence that has stoked expectations the central bank will slash interest rates again this month.

"As the economy weakens and affordability becomes a real issue, first home buyers are usually the first to suffer," Dow said. "During 2008, the number of house sales fell dramatically and the proportion of lower-value properties selling significantly decreased."

Reserve Bank Governor Alan Bollard will cut the official cash rate by 100 basis points to 4% on January 29, according to economists at Westpac Banking Corp., extending the steepest easing cycle since the OCR was introduced in 1999. The prospect of a lower OCR has spurred home lenders including Westpac and ANZ National to lower mortgage rates this month.

The average sale price for December rose slightly from the previous month and was down on a year earlier at $378,605, Quotable Value said today. Its figures measure prices in the three months through December from the same period a year earlier.

Separate figures from the Real Estate Institute of New Zealand today showed the median length of time to sell a house rose to 45 days last month from 36 days in December 2007.

A total of 4,302 homes were sold last month, down from 5,597 in December 2007, the Auckland-based REINZ said today. Sales rose slightly from November's 4,279.

For the month of December, the median house price fell to $328,500 from $337,500 in November, according to the REINZ. The biggest price declines were in holiday destinations or districts where prices have soared in the past two-to-three years, the institute said. Prices in Nelson/Marlborough dropped 11% and in Southland they declined 13%, it said.

"The data is consistent with the housing market remaining in a weak state, but at least it's not getting worse," said Shamubeel Eaqub, economist at JBWere Goldman Sachs. "The economy needs stimulus to commence a recovery - the most likely candidate will be further OCR reductions by the RBNZ."

Shares of Fletcher Building, the nation's biggest construction company, fell 0.9% to $5.84, though the stock started the trading session as low as $5.82.

By Jonathan Underhill

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