New Zealand house prices fell from record highs while sales dropped in June, a survey showed yesterday, suggesting the market may be cooling

New Zealand house prices fell from record highs while sales dropped in June, a survey showed yesterday, suggesting the market may be cooling and backing views interest rates will remain on hold in the near future.

The Real Estate Institute of New Zealand (REINZ) said the national median house price eased 0.7 per cent to NZ$347,500 (S$410,335) from May, but was up 12.1 per cent on the same month a year ago.

Institute members sold 7,474 houses compared with 9,285 the month before, and sales were 11.3 per cent lower than a year earlier. REINZ said the data should be treated with some caution because it had brought forward the reporting date for the survey.

Analysts said the figures showed more definitive signs that the market, which is a key inflation concern of the Reserve Bank New Zealand, is cooling.

‘The latest outcome will also give the RBNZ more than just ‘tentative’ signs that the housing market is slowing,’ Nick Tuffley at ASB Bank, said.

‘We are more confident that the RBNZ will remain on hold in July, though there remains the risk the RBNZ hikes later in the year if the economy (and housing market) do not appear to be slowing sufficiently to rein in inflation.’

The New Zealand dollar showed limited reaction to the data, trading around US$0.7750.

Last month, the RBNZ raised its official cash rate for the third straight time, setting it at 8 per cent, citing concerns about robust domestic spending and the upbeat housing market.

The RBNZ did not provide an outlook in its June policy statement but governor Alan Bollard told Reuters in an interview it would not ease monetary policy until it saw a clear slowdown in housing and consumer demand.

Fourteen of 17 analysts in the latest Reuters poll expect the central bank to keep rates on hold at its review on July 26, although the median risk for a rate rise is put at 40 per cent.

The REINZ said the methodology change may have reduced sales by around 8 per cent, or 600 sales, based on past June month averages and may also have affected median house prices.

Nonetheless REINZ national president Murray Cleland said the market was clearly showing signs of a slowdown, although it was still unclear if it was due to interest rate increases.

‘The other factor is that we are now well into winter and that has a heavy influence on people’s inclination to transact property,’ he said.

The median number of days taken to sell a house was unchanged at 30 days from April. ‘These indicators suggest the housing shortage remains as the main dynamic in the residential property market with too many buyers chasing too few houses,’ Mr Cleland said.

Prices in seven of REINZ’s 12 regions fell, while those in five areas rose.

Source: The Business Times, 12 July 2007