New Zealand Herald property editor Anne Gibson writes on today's cut to the Official Cash Rate:
Limbo down, now! How low can you go?
Interest rates are jigging down quite nicely to a type of dance as Alan Bollard's pole-lowering moves were ramped up a notch this morning.
But his dive for the ground is not exactly firing up the fairly pitiful state of our
housing market. Why?
Job security, people's confidence in their own financial well-being, the outlook for our future and the sheer guts and determination it takes to step into what appears to be an ever-falling housing market - these are just some of the factors which are driving people to stay out of the market regardless of what interest rates do.
Annual house sales for the year might be 50,000 or 70,000 but nowhere near the decade's high of about 100,000 _ and price drops invariably follow volume falls.
Economist opinion about where house prices will head ranges from those who have been resoundingly bullish about the housing market (particularly BNZ's Tony Alexander) to our single saddest doom-sayer (Gareth Morgan, about to endure another cheerful Wellington winter).
Now, they all pretty much singing the same song right now: there's room for house prices to fall further.
So just how low could prices go, if the limbo rock is to continue?
Morgan was on National Radio's Panel this month singing his usual woeful tune a 30 per cent fall.
Alexander said in last week's commentary that there was scope for house prices to "edge down a tad further" and cited QV's latest figures. "Compared with the peak in the house price cycle a year earlier, average NZ house price have declined by 8.9 per cent.
Over the same period of time they have declined 18.6 per cent in the United States and approximately 18 per cent in the United Kingdom," he said.
The late Mark Thompson used to run Barfoot & Thompson from a fairly rough office around Fort St and passed away well before his time.
He had a cartoon on his wall depicting a sad- looking man sitting in the gutter. The caption read The man who waited for house prices to fall.
That message was fair enough about a decade ago when riches seemed in everyone's reach through the housing market.
This week, in a new twist on housing extreme makeovers, Hugh Pavletich of Christchurch sent me a link to the Americans demolishing new Californian houses because vacant lots are worth more than housing estates no one wants to buy.
Would we now have the courage to parody the plight of desperate kiwis who bought at the peak on 110 per cent finance? These days, they are more likely to be meeting with the swelling numbers at banking and real estate offices who specialise in mortgagee sales than gloating about their path to new riches.
The housing market's inglorious finale is certainly not being saved by limbo-low interest rates.
