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Reserve Bank sees further house price falls

Housing market activity continues to slow, house prices may fall further in the near term and floating rate mortgage debt has hit a near decade high, according to the latest Reserve Bank Monetary Policy Statement.

Wednesday, December 15th 2010, 12:00AM

by The Landlord

The continued housing market slump was one factor cited by the central bank for its decision to leave the OCR at 3%.

RBNZ governor Alan Bollard said "current low interest rates are having a less stimulatory effect than in the past."

"Despite the floating mortgage rate being below its historic norm, activity in the housing market has weakened further."

"While some of this slowing was driven by the earthquake-related disruptions to the Canterbury housing market, reduced turnover was also observed elsewhere in New Zealand. The current level of house sales is consistent with further declines in house prices over the coming months."

QV research director Jonno Ingerson believes that while prices may stay flat, "we don't think they're going to fall a lot further."

He said that a small fluctuation was possible but he "wasn't seeing anything to suggest they'll plummet" in value.

The bank said that with little sign of improvement in the housing market there were concerns further declines would have a negative impact on household spending. Despite signs of global growth and recent employment gains "these downside risks cannot be ignored."

While wholesale interest rates had increased, the Bank noted there has been little change in mortgage interest rates since the September Statement.

"While the floating mortgage rate has risen and fixed rates reduced this year, the mortgage curve remains positively sloped, causing borrowers to continue to favour floating rate loans. As a result, the proportion of floating rate mortgage debt has continued to rise, reaching over 42% for the first tome since early 2000."

The bank also reported a fall in the average time to reprice a mortgage to eight months, down from the high of almost 20 months in the middle of 2007.

Worryingly, despite the bank reporting a recovery in net immigration its said housing turnover has continued to decline and "house prices have fallen further."

The subdued market is also prompting reticence from sellers, "who appear to be holding back from putting properties on the market."

In a pessimistic outlook the Statement says house prices are likely to fall further in 2011, and rise only "gradually" beyond 2011.

Ingerson agreed with the bank that prices won't begin to rise until after 2011, saying that would be when factors such as the undersupply of houses combined with net immigration would boost values.

« Sales and median price fall in DecemberWhat's happening across the regions »

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 4.94 - - -
AIA - Go Home Loans 7.49 5.79 5.49 5.59
ANZ 7.39 6.39 6.19 6.19
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.79 5.59 5.59
ASB Bank 7.39 5.79 5.49 5.59
ASB Better Homes Top Up - - - 1.00
Avanti Finance 7.90 - - -
Basecorp Finance ▼8.35 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.54 - - -
BNZ - Rapid Repay 7.54 - - -
BNZ - Std 7.44 ▼5.79 ▼5.59 5.69
BNZ - TotalMoney 7.54 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.69 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 6.95 5.79 5.59 5.69
Co-operative Bank - Standard 6.95 6.29 6.09 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 5.99 5.89 -
First Credit Union Standard ▼7.69 6.69 6.39 -
Heartland Bank - Online 6.99 ▼5.49 ▼5.39 ▼5.45
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.60 6.65 6.40 -
ICBC 7.49 5.79 5.59 5.59
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.25 ▼6.69 ▼6.49 6.49
Kiwibank - Offset 7.25 - - -
Kiwibank Special 7.25 ▼5.79 ▼5.59 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 7.94 ▼5.75 ▼5.99 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.49 6.95 6.29 6.29
SBS Bank Special - ▼5.89 ▼5.49 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 4.94 ▼4.89 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.19 6.49 ▼6.39 ▼6.39
TSB Special 7.39 5.69 ▼5.59 ▼5.59
Unity 7.64 ▼5.79 ▼5.55 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society ▼7.70 ▼5.95 ▼5.75 -
Westpac 7.39 6.39 6.09 6.19
Westpac Choices Everyday 7.49 - - -
Westpac Offset 7.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 5.79 5.49 5.59
Median 7.49 5.84 5.75 5.69

Last updated: 9 December 2024 10:05am

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