New Zealand house prices and sales volumes unexpectedly surged upwards in the quarter to December 2004 as fierce competition between the major banks over that period continued to postpone the mortgage interest rate rises many had expected.
Thursday, January 27th 2005, 8:59PM
by The Landlord
The New Zealand median dwelling price, which started the quarter at $247,000 lifted 5.3% to reach an all-time high of $260,000, while the AMP Home Affordability Index for December declined 7.4%, the third decline in the past three consecutive quarters. While quarterly dwelling sales were down 21%, however, on the same period last year, sales are still historically high when you compare them to normal residential real estate cycles in New Zealand.
“The market had been predicting for some time a drop in the housing market but these figures show that that talk was obviously premature,” AMP Financial Services general manager savings and investments Roger Perry says.
“But, the competition between banks in the two-year fixed mortgage space has now reversed and interest rates are again on the rise, so we would expect to see home affordability continue to decline in the short term. Eventually, however, those higher interest rates will likely slow the increase in house prices as demand settles. We’re already starting to see that slowing now.”
Across the country, the New Zealand Index reflected a 12-monthly decline in home affordability for the ninth consecutive quarter, the steepest annual decline recorded in almost nine years.
Graham Crews, Senior Lecturer in Real Estate at Massey University, says this is due to sustained underlying pressure on the residential property market. “The main drivers have been a strong economy, low unemployment, favourable interest rates, historically high net migration inflow, globalisation of New Zealand property and, in the end, high levels of confidence.“
