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Falling house prices good news for Reserve Bank

The boom in house prices of the last five years is all but over, according to Gareth Kiernan, senior economist at Infometrics.

Friday, October 27th 2006, 12:00AM

by The Landlord

Kiernan pointed to Quotable Value’s house price indices for the June quarter as evidence that the market has cooled significantly. Over one-third of local council areas experienced price falls over the June quarter, and the nationwide increase in house prices was just 1%. Both figures were the weakest since 2001.

“The extended period of higher interest rates, combined with the effect of last year’s high dollar on export incomes, is now having an impact on property prices in provincial areas,” said Kiernan. “Kaikoura and Mackenzie are now experiencing annual price declines, with other provincial areas such as Otorohanga and Westland at risk of the same fate.”  


Infometrics’ latest building and property forecasts show nationwide house price inflation slowing to below 2.5%pa by September 2007.

The latest house price data gives the Reserve Bank some breathing space ahead of tomorrow’s official cash rate review.  

Economic indicators published since the Bank’s last interest rate review have not been especially strong. The effect of a cooling real estate market on household spending could reassure the Bank that its monetary policy ‘pipeline’ is gradually working.

“The Reserve Bank is likely to leave interest rates unchanged, but maintain a hawkish tone in its statement,” Kiernan predicted. Infometrics expects economic growth to accelerate to above 2.5% pa by the second half of 2007 – a rate that is still sufficiently slow to ease inflationary pressures further over the next year.  

In line with their economic projections, which are at the bullish end of the spectrum, Infometrics predicts that the Reserve Bank will not start to lower the official cash rate before December 2007.

« Property investors refocus on cash flowBullish investors defy experts’ expectations »

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Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 2.89 3.25 3.39
ANZ Special - 2.29 2.69 2.79
ASB Bank 4.45 2.29 2.59 2.65
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.29 2.59 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 2.89 3.19 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online 2.50 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.50 3.40 -
HSBC Premier 4.49 2.25 2.35 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - 1.99 - -
ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.79 3.04 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.20 3.50 3.50
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.35 2.65 2.65
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
Lender Flt 1yr 2yr 3yr
SBS Bank 4.54 2.79 2.79 3.15
SBS Bank Special - 2.29 2.29 2.65
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.09 - -
The Co-operative Bank - Owner Occ 4.40 2.29 2.59 2.79
The Co-operative Bank - Standard 4.40 2.79 3.09 3.29
TSB Bank 5.34 3.09 3.29 3.45
TSB Special 4.54 2.29 2.49 2.65
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 2.29 2.69 2.79
Median 4.54 2.79 2.99 2.96

Last updated: 15 February 2021 8:47am

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