You make up your mind what is happening

Friday, August 15th 2008, 6:00PM

by Philip Macalister

This week has been a week of conflicting statistics on what is happening in the residential property market. QV reported that house prices had fallen for the first time in seven years, while REINZ, as it is wont to do, painted a much more positive picture later in the week.

While people have been quick to jump on this hint of rebound, BNZ said this week that the latest numbers show we’re merely pulling back from an ugly brink, not facing the end of the downward slope.

Bank analyst Tony Alexander says it would be wrong to believe there’s anything remotely smelling like an upturn around the corner.


However, I did see a report this week from ANZ which put the market into a useful perspective. It said the property market is going through a familiar cycle: six years of growth, followed by a year of stabilising prices and two to four years of “flattening” where rising wages push close the affordability gap.

In what seems like typical economist-speak these days (it seems they all want to show the world they have personalities and humour – or they all have good copy writers): “The big picture is that we've eaten like an elephant for the past five years. Now we're going through the rebalancing phase where those sectors which have done well since 2003 will find it tough.”

This bank’s prediction is that property prices will drop 10 – 20%, followed by an upward correction and slow improvement with a return of real strength in the five to 10 year timeframe.

“There's still a lot of cash around – investors and speculators who pulled out of the market in 2006 and are sitting back smoking a cigar just waiting for the right time to re-enter the market.”

My discussions with investors show that many are actually buying at the moment already.
But to help you make up your mind on what is happening you can visit the statistics sections of Landlords.co.nz where we have, this week, uploaded the latest house prices data and rent data.

One stat, though, which experts agree on is mortgage rates. Good Returnssurvey of economists  this week shows they are unanimous (for once). All agree that the Reserve Bank will cut the official cash rate next month. While home loan rates have been static this week, expect them to fall some more.
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