Is this what lies ahead for us in Australia?
New Zealand house sales and prices fell in February as banks put up mortgage rates to 11% or more.
Our rates are nothing like that, but having risen by up to 1.25% in seven months, quite a few people in Australia are going to be squeezed. Certainly the 12% plus rise in house prices in the year to December will ease this year after the rate rises from the Reserve Bank and the extras loaded on by the banks.
Across the Tasman the New Zealand house property market seems to have got to stall position a lot faster than we have.
With no sign of any easing in official interest rates, there’s every indication there could be a repeat of February’s experience in the months ahead, even as rising export income and the terms of trade continue to pump more money into the NZ economy.
House sales fell sharply in February, down some 32% on February 2007, while prices dropped to a 12-month low.
This is going to be bad news for the big Australian banks in NZ, as well as media groups such as APN and Fairfax with house ads falling from lower sales and lower demand for mortgages.
The Real Estate Institute of New Zealand said that house sales dropped 32% to 6,356 homes from 9,357 a year ago.
The median house price dropped to NZ$337,500 ($271,000) from NZ$340,000 in January.
NZ Reserve Bank Governor Alan Bollard kept the official cash rate at 8.25% last week, saying a "sharp slowdown” in the housing market was spilling over into consumer spending.
The NZ Treasury Department this week said the property market was cooling sooner than expected, which will curb economic growth.
And the Real Estate Institute joined in it with commentary with yesterday’s report:
"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% above 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” the National President of the Institute Mr Murray Cleland said today.
“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 per cent 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."
The median house rose just 0.7% from a year earlier, the slowest pace since the 12 months ended January 2002, the institute said.
Last week, the central bank forecast prices will fall 3.9% in the year ending Sept 30, the first decline in prices since 2000.
The median time it took to sell a house soared to 50 days from 32 days a year earlier, and 49 days in January, the institute said.
Sales rose from 5,186 in January to 6,356 in February, but that was still well down on February 2007.
