Economic factors have been working against the property market in New Zealand and people are finding it difficult to purchase new property, resulting in a slowdown.
Quotable Value, largest property Information Company in New Zealand, found that the residential property market is experiencing downturn with growth rate declining in New Zealand’s major cities and provincial centers, as reported by nzherald.
In January 2008, property value increased by 8.9% but it was less than 10% recorded in December 2007. The average national residential sale price increased to $390,636 in January 2008 as compared to $388,253 registered in December 2007. Moreover, there is also a significant increase in the average house price in the country from $12,000 to $390,000.
There is a sharp fall in property value in Hamilton, the seventh largest city in New Zealand, from 11.8% to 8.3%. Prior to October 2007, Hamilton enjoyed higher growth rate compared to other main centers but drought has reduced the production levels. Thus, farmers prefer to purchase extra feedstock instead of investing in property. This facto also took a toll on New Zealand’s property market.
The slowdown in New Zealand’s property market has occurred due to high interest rate for mortgages that has created difficulties for property owners with low discretionary incomes and making property unaffordable for potential buyers. It has an adverse effect on owners of highly geared investment property portfolios with fixed term mortgages, compelling them to re-negotiate at comparatively higher interest rates. Eventually, the selling prices of property have pushed up making house property unaffordable for the public.
Additional factors are also contributing to the slowdown in the property market. These factors include pressures of high fuel and rising food prices and the Reserve Bank keeping the Official Cash Rate high. These factors are collectively putting extra burden on consumers and discouraging them from directing incomes in property.
As per a Senior Research Analyst at RNCOS, “Though the housing market of New Zealand is suffering from various economic difficulties, prices of houses in the country are increasing at a low rate. The varieties of houses need to be expanded to ensure that homes can be purchased by consumers according to their income. At the same time, the New Zealand government must take care of economic factors like interest rate and inflation so that consumers can invest in new property.”
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