Pick for house inflation to drop under 5%

10-09-2007 | Not Specified

The public are overwhelmingly negative about continual growth in residential real estate prices. This is according to results of a BNZ survey of readers of Tony Alexander's BNZ Weekly Overview. Of the 21 responses, 18 were negative.

The BNZ is picking that the house price inflation rate will be in single figures by the end of 2007 and sit between 0% and 5% over the next couple of years.

Dwelling sale numbers were 14.3% lower in July 2007 than a year before, according to the Real Estate Institute of New Zealand. The median house price eased to $345,000, from $350,000 in May. However, prices are still 10% ahead of last year and they are taking a similar length of time to be sold in July. In July 2006 it took an average of 31 days to sell a house, which was four days faster than July 2007.

Anecdotal evidence is that investors are backing away from the market however.

The BNZ Weekly Overview in August reports that residential real estate sales had a poor month in July due to shortage of stock and buyers not showing much urgency.

The trend seems to point to an increase in time taken to sell a property as buyers are cautious and vendors are still asking over optimistic prices.

BNZ is firmly of the view that the housing market has passed its peak and the boom has ended.

However, Tony Alexandra also points out that construction is likely to carry on. Growth in this area is likely to carry on as there is a backlog of construction orders caused by shortages of builders and delays in the consent process.

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