NZ house prices fall for 1st time in 6 mths

No of properties sold in Dec drops to 4,957 from 6,056 in Nov

New Zealand house prices fell for the first time in six months in December as the number of properties sold declined for a third month.

Prices fell 0.9 per cent from November, the Auckland-based Real Estate Institute of New Zealand Inc said yesterday in an e-mailed statement, citing an index. The number of properties sold dropped to 4,957 from 6,056 in November.

New Zealand lenders have been raising interest rates on fixed-term home loans as their funding costs increase, curbing demand for property. Falling house prices add to signs the economy’s recovery from recession may be only gradual in the first half of the year, making it unlikely the Reserve Bank will raise interest rates anytime soon.

‘The market has started to lose momentum,’ said Nick Tuffley, chief economist at ASB Bank Ltd in Auckland. The Reserve Bank ‘won’t be uncomfortable with the trends that they are seeing’.

New Zealand’s dollar fell to 73.39 US cents at 10:55am in Wellington from 73.64 cents immediately before the report was released.

The average interest rate on a three-year-fixed home loan was 7.93 per cent in November from 7.06 per cent in July, according to central bank figures.

Mortgage rates are rising even as Reserve Bank governor Alan Bollard keeps the official cash rate at a record-low 2.5 per cent. He said on Dec 10 he didn’t expect to raise borrowing costs until the middle of the year.

Mr Bollard expects the economy will grow 3 per cent this year after contracting 1.4 per cent in 2009.

House sales slumped in 2008 amid a deepening recession, and only began rising on an annual basis in March last year. Sales in December increased 15 per cent from a year earlier. Sales in November were 42 per cent stronger.

‘It’s an appreciating market fuelled by a shortage of properties for sale,’ Peter McDonald, president of the institute, said in the statement. The decline in sales is ‘concerning’, he added.

Sales traditionally fall in December and January because of the Christmas break and summer vacations.

Source: Business Times, 19 Jan 2010