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Regions to be bit by stagnant property values and falling sales: Report

Sharply dropping house sales will cause a fall in house prices over the next two years and the regions are in for a housing shock.

Thursday, November 15th 2007, 12:00AM

by The Landlord

By Andrea Milner

With interest rates and net migration taking the heat out of the housing market, sales volumes are forecast to drop from 105,532 for the June 2007 year to 78,447 by June 2009.  

Findings released from the PMI Outlook for the New Zealand Property Market 2007 - 2010 show house price growth is forecast to drop to a 10-year low of -2.7% in March 2009, before recovering slightly to -1.1% in June 2009.
 
“The housing market is showing the strongest signs of a downturn since the extended period of growth began in 2001, and some house price falls are expected throughout 2008/2009,” PMI chief executive Ian Graham.



Report author Gareth Kiernan of economics firm Infometrics says: “Some regions are faring better than others, but provincial areas outside the major centres are already showing signs of being more sensitive to the increased interest rates.”

The catalyst that will slow the market going forward, Kiernan says, is that demand from investor buyers is definitely “drying up”. He cites high finance costs, low rental yields and rising interest rates combining to make it a lot more difficult to make buying an investment property stack up.

Investors have fuelled a lot of the price growth in regions like Taranaki/ Manawatu/ Wanganui, he says. “Eighteen months ago Australians were putting money over here because the rental yields looked much better and the Australian market was already in a slowdown. Those yields have been crunched with strong price growth over the last couple of years and with weak population growth and investor demand already drying up there are too many houses in the area to justify what’s been going on, so we would expect some correction in that market.”

By June 2010, average prices for the Taranaki/ Manawatu/Wanganui region are forecast to have taken an 11.4% drop.

Kiernan says most of the region struggles with shrinking population. “They’ve had very strong building activity over the last five years and it’s still rising even now, whereas you look at New Zealand overall – the peak was back in 2004 in construction, so its hard to reconcile the increase in the size of the dwelling stock that we’ve seen during that time with what population numbers have been doing.

“For investors the big question is whether they will still have tenants in the houses in that region.”

The problems facing Taranaki/ Manawatu/Wanganui are widespread. Building activity in every region except Northland indicates oversupply developing across the country. Falling immigration is also an issue across the whole country.

House price growth is forecast to recover only modestly in 2010. Property is still likely to be well above the long-term trend line in terms of real value even by then, Kiernan says, so he wouldn’t expect a great recovery given property will still be relatively unaffordable at that stage.



« Property investors refocus on cash flowFree Investment Property Showcase Events: Auckland, Wellington and Christchurch »

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

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