More house price rises predicted

Friday, September 4th 2009, 1:21PM

Next week we have more of the latest house price data coming out. These numbers are always eagerly awaited, but arguably more so this month.

Everyone wants to know whether the market has bottomed and is going to resume its upward trek or crash again.

As readers will know I have argued in favour of the market at least bottoming or maybe embarking on a slow upward recovery.

Not for one minute do I think we are heading back to the boom times again. Indeed as the lead story in the NZ Property Investor Magazine out next week warns, we are unlikely to see another boom period like the previous one.

The story suggests a back-to-the-future approach maybe the best strategy for investors.

My view continues to be that there are a bunch of factors, such as low interest rates, positive migration etc, which will put a foundation under house prices for now.

However I questioned my view when I looked at this chart prepared by ANZ and presented to the NZ Property Investors Federation conference.

The chart shows that if you believe in cycles and history then there is likely to be a further fall in house prices.

On the upside there are five periods where house prices rose, with the latest from 2002 to 2007 being the longest and strongest.

When house prices fell the downward periods lasted from 10 to 24 quarters and the falls ranged from 5% to 40%.

When you look at the strength of the last boom, prices rose 88% over 24 quarters, but have only fallen 16% over eight quarters then you could quite reasonably be expecting to see a further decline.

My guess though is that in this next round of house data releases we will see further gains. After all that is what the Barfoot and Thompson numbers showed earlier this week.

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