Down and out? Maybe not...

The property market is down, but it is it out? Market commentator Kieran Trass says a crash is "inevitable" while others take a contrary view.

Friday, February 15th 2008, 2:10PM

by The Landlord

"We are heading into the worst property slump we have experienced in nearly 20 years. This slump will eclipse the soft slump of the late 1990's by far and will be more like the early 1990's slump when property values fell by as much as 25%".

He says the much sought-after soft landing is now "not even a remote possibility".

He says many suburbs in the main cities have seen big declines in house prices as the market moved into a slump.

"This year property values are expected to fall by 10% or more in some suburbs based on the statistical analysis models used by SuburbWatch."

However, Bank of New Zealand economist Tony Alexander has a slightly different argument. He says that the decline in house prices, shown in data releases from QV and REINZ, is not as bad as many are making out.

While a long-overdue correction is happening and has some months to run, he can also see a number of factors supporting the market.

"We don't think it is appropriate to talk about a major decline in our housing market as such, but the massively overdue correction is now well underway and we think it has a great number of months yet to run."

Alexander says the next few months are likely to be a period when investors are looking to sell but low-end buyers are holding back before perhaps re-entering the market in Spring.

“We think they will be buying because quite clearly, as the Prime Minister was pointing out this week, there is a shortage of affordable accommodation in New Zealand and a queue of people wanting to buy properties. Apparently her officials estimate that 18,000 fewer than necessary dwellings are being constructed each year,” Alexander says

”Throwing in the extremely tight labour market, accelerating wages growth, and upcoming tax cuts we think there is reasonable insulation against the obviously painful interest rates plus net migration flows that appear to be heading toward zero.”

« Property investors refocus on cash flow

Free Investment Property Showcase Events: Auckland, Wellington and Christchurch »

Special Offers