New property value numbers released today show continued falls through December, but signs are starting to emerge that last year's huge interest rate cuts might be starting to make a difference.
New Zealand property values fell 7.4 per cent during 2008 - the first sustained drop since 1998, says a new report issued by QV Valuations.
The Real Estate Institute has also released house price figures today, that also showed house values falling in December.
"Property values held reasonably flat through the first three months of the year, but the decline kicked in through the autumn and winter months, during which time values dropped 6 per cent," said Quotable Value's Mark Dow.
"With the significant drops in interest rates over the past three months, there has been an increase in market activity and values appear to be flattening again."
Property values grew by 120 per cent between 2002 and 2007, said Dow. The last period of sustained growth happened between late 1992 and 1997 - when values went up by 54 per cent.
"After such a period of sustained growth it's inevitable that we will see a correction. The question remains how long this period of falling property values will continue," said Dow.
The Real Estate Institute of New Zealand (REINZ) is still talking up the property market, despite its own stats released today showing the median house price fell 4.78 per cent last year.
The number of homes sold nationwide in December was 4302, well down on the 5597 in the same month last year but slightly up on November sales of 4279.
The national median house price for December was $328,500 compared with $337,500 in November and $345,000 in December last year.
Institute national president Mike Elford said the downturn of the past few months was, in part, evidence of a "correction" of what in some areas was wrongly inflated values.
"This, combined with factors such as our own general election, which historically sees a slowing of the market, and the global economic situation has resulted in the slowest residential market we've seen in several years and in areas where prices had sky-rocketed, these have come back," he said.
It is taking longer to sell houses. It took a median of 45 days in December 2008 compared with 36 in December 2007.
Elford said the number of sales and time it was taking to sell a house was consistent with the market in December 1999 and 2000.
Deutsche Bank Chief Economist Darren Gibbs said in light of the still- deteriorating global and local economic picture, it was difficult envisage any sort of sustained recovery in housing until late this year at the earliest, "notwithstanding the likelihood that domestic mortgage rates will likely soon move towards some of the lowest levels seen since the 1960s."
A deteriorating labour market, and associated concerns about job security, would bring more distressed sellers into an already difficult market, said Gibbs, reinforcing the downward pressure on selling prices.
"We think that even those sellers that are not stressed will continue to become more realistic about pricing in the face of a substantial number of property listings and still long selling times," he said. "Further falls in house prices will, in turn, weigh upon consumer spending as households seek to rebuild their respective balance sheets."
Goldman Sachs JB Were economist Shamubeel Eaqub said the data released today was "consistent with the housing market remaining in a weak state, but at least it's not getting worse. The economy needs stimulus to commence a recovery."
ASB economist Jane Turner said today's REINZ figures demonstrated that lower interest rates delivered by the Reserve Bank late last year were starting to have some effect on the housing demand.
"With another large rate cut on the way in January, the outlook for the housing market certainly seems to be improving," she said.
But it was early days yet and the key question this year would be if lower interest rates would be enough to revive the housing market when households are facing rising unemployment and weaker income growth.
"In addition, the international credit environment remains challenging and will continue to affect credit conditions at home, limiting the effectiveness of lower interest rates," said Turner. "Some improvement in housing turnover may be on the cards, but a sustainable recovery is still a way off.
QV says that during 2008, the number of house sales fell dramatically and the proportion of lower value properties selling also significantly decreased.
"This pattern reflects the wider drivers of the property cycle," said QV's Mark Dow. "When the economy is strong; job prospects are good and immigration is increasing, then demand for houses, particularly first homes, pushes prices up.
As the economy weakens and affordability becomes a real issue, first home buyers are usually the first to suffer; sales volumes drop and activity in the market moves back to mid to higher end properties as we saw through 2008," he said.
The 7.4 per cent decline for the year was calculated by QV by comparing the three months ending December 2008 with the same period last year. The average sale price for December increased slightly to $378, 605.
All the main centres have shown a fall in property values, says QV. In the Auckland area, there was a fall of 8 per cent; Hamilton was down 9.3 per cent, Wellington 6.9 per cent, while Christchurch fell 8 per cent and Dunedin 7.7 per cent.
Across the nation:
* Whangarei: Down 8.6 per cent
* Auckland: Down 8 per cent
* Hamilton: Down 9.3 per cent
* Tauranga: Down 9 per cent
* Wellington: Down 6.9 per cent
* Christchurch: Down 8 per cent
* Dunedin: Down 7.7 per cent
* Invercargill: Down 9.1 per cent
- HERALD ONLINE/ NZPA