One of New Zealand’s leading economists believes the fall in house prices is over and the market is set to resume rising, albeit at a substantially slower rate than in the last seven or so years.
Tony Alexander, the Bank of New Zealand’s chief economist, has scoffed at doomsayers who are predicting the country’s housing market will yet fall 30-40%.
Pressures such as above average population growth, below average interest rates and a shortage of housing will push prices back up, writes Alexander. New Zealand has probably escaped the worst of the property storm, as seen overseas. This may be due to more responsible lending practices – as far as I know, we do not have a significant equivalent to the US sub-prime market. There are certainly inexperienced investors who have overcapitalised in the hope of grabbing quick gains, and with rising unemployment some of these may be forced to shed their investments. There are certainly more mortgagee sales in evidence, but nothing like in some parts of the world (50% in California, for example).
A key for New Zealand will be the reestablishment, or improvement of our export markets. As long as we can earn overseas income, businesses will be able to employ staff and support local firms. Confidence regarding growth of our overseas markets has improved, though from a negative base, and this is a trend that must continue, and of course be borne out in reality.