The New Zealand housing industry sales drastically dropped by 40% in the first quarter of this year due to credit crunch and elastic demand.
Private Mortgage Insurance (PMI), a firm providing mortgage insurance, revealed in its research that the New Zealand housing industry’s sales fell by 40% in the first quarter of 2008 against the same period in 2007, as reported by NZ Herald.
The research also says that the quarterly analysis highlights continuous and the fastest fall in home prices growth in a decade (1999-2008). Besides, median house prices, recorded annually, declined to 2.1% as compared to 13.8% recorded in the first quarter of 2007.
High interest rates are mainly responsible for steep decline in the house sales, as prospective home buyers refrained themselves to get new home financed. Moreover, the country is facing heavy shortage of credit that negatively impacted the housing industry’s growth in the last quarter. People from various backgrounds struggled to invest in new homes due to poor financial conditions in the country.
Not only this, revenue growth in the New Zealand housing industry also showed slump in the first quarter of this year. High revenue-generating areas, Hawke’s Bay and the Bay of Plenty, which are famous for their coastal property and holiday homes, saw decline in demand for properties. In fact, this was the first time ever when the housing market of these areas plunged to such a low level as the consumers did not show any interest in buying homes at these places.
Though fall in the New Zealand’s housing market is accredited to credit crunch in the country, the New Zealand Reserve Bank is saying that the financial sector still has enough cash to operate properly. PMI also revealed that the house sales volume is anticipated to remain low for the remaining months of 2008 but 2009 is expected to see stability in the market.
According to a Research Analyst at RNCOS, “Viewing the constant decline in home prices in the New Zealand housing industry, a huge drop in the industry is apparent. People are not ready to sell off their properties at reduced prices. So the companies operating in the countries housing market should work on framework of major drivers which can justify exorbitant prices, from growing income, to population and borrowing costs.”
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