Sellers drop house prices for buyers

New Zealand residential property prices fell last month as vendors cut prices to woo a smaller pool of buyers.

Monday, September 8th 2008, 12:00AM

by The Landlord

The average property price fell 4.5% in August, adding to a 2.2% drop in July, according to Quotable Value, the government valuation agency.

There are definitely more properties selling at reduced prices as vendors adjust their expectations,” said Blue Hancock, a spokesman for QV Valuations.

“Many buyers are realizing that price decreases are making this a good time to buy, and that they can bargain strongly,” he said. “As a result there will be further declines in value before the market levels out.”

Demand for residential properties has tumbled in the past few months, based on government figures, reflecting weaker consumer confidence in an economy that’s probably fallen into recession. Home building consents held near a 22-year low in June and July, according to Statistics New Zealand.

Still, some property investors are taking advantage of the market to add to their portfolios. Some 20% of property investors in the inaugural landlords.co.nz quarterly survey plan to buy another rental property this year. By the end of 2009, 52% of those polled plan to buy another property. The online survey of 600 investors was taken earlier this month.

"The market has been out of equilibrium with a lack of buyers, however there are early signs of a more positive mood,” QV’s Hancock said.

In Auckland, property values fell 5.8% in the three months to August, from the same period last year, with the average sale price falling to $503,026.

Hamilton posted the biggest decline among the major centres, with an 8.5% drop and an average price of $335,292. A lack of confidence in the market and high interest rates are curbing demand in the Waikato city, according to QV Valuations’ Richard Allen.

In Wellington, property values fell 3.8%, adding to 1.6% decline in July. Christchurch valuations fell 5.8% and Dunedin’s declined 7.8%.

Many economists predict the central bank will cut its official cash rate at every opportunity this year to stoke the economy.

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