Ho-hum for house prices
There's little hope that house prices are on the rise, according to Bank of New Zealand chief economist Tony Alexander.
Sunday, April 9th 2000, 12:00AM
There's little hope that house prices are on the rise, according to Bank of New Zealand's chief economist Tony Alexander.
In the bank's latest monthly Observer, Alexander points out that average house prices nationwide were only 0.1 per cent higher in both the September and December quarters last year and that the nationwide index is basically where it was in September 1997.
"We have been reluctant to call house prices down this year and remain so in light of the fairly strong growth in household incomes," he says. "We estimate after adjusting for inflation, disposable household incomes in the December quarter were 4.2 per cent higher than a year earlier.
"But scope for house prices to rise is clearly almost entirely absent. This is good as far as inflation and monetary policy goes, and maybe good as far as giving those over-optimistic people of a few years ago a lesson in economic reality.
"But it also means some restraint on growth in household spending because of the effect on perceptions of personal wealth."
Alexander also says the recent weakness in nationwide house prices doesn't mean that houses are now relatively cheap and so good buying. Offsetting rapidly rising employment (and therefore household incomes) and rising exporter incomes he lists a host of negatives including net migration outflows, rising interest rates, upcoming cuts in state house rentals, high household debt to income ratio and booming construction levels.
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