Optimism is short-lived

People are already paying too much for homes in some suburbs, says property market analyst Kieran Trass of suburbwatch.co.nz.

Trass believes these buyers fear they will miss the trough of the market, but analysis shows a further deterioration in values in some suburbs is just around the corner, including Massey in Auckland, Wainuiomata in Wellington and Bromley in Christchurch.

"The people paying too much appear to be driven by the perception that the market has reached its lowest point," Trass says.

SuburbWatch shows some suburbs are in for a further 5 to 10 per cent fall in values this year. Some - including Mt Roskill in Auckland and Taita in Wellington - have already fallen by 16 per cent in the past year alone.

Although people are buying now, Trass is not convinced that a real estate recovery is looming. The site's trend indications are "clearly signalling that the current optimism about the property market will not prevail for long".

Prices are still at historic highs after the country's "biggest and longest property boom in recorded history" from 2002 to 2007. As a result, Trass says it is unrealistic to expect that the slump will be short-lived.

While affordability has improved, tightened bank lending criteria make mortgages difficult for many.

And the affordability balance could easily tip, given the "very real potential for global upward pressure on interest rates".

Home buyers were excited by the news that sales volumes last month were up 20 per cent on those for March last year, Trass says, but they are still 40 per cent lower than in March 2007.

And properties are still taking a long time to sell. The median number of days on the market was 44 in March, higher than for any March in the past eight years.

The hope that the market will be boosted by a net migration surge as a result of the financial crises is still some way off.

Trass believes the country would need an annual net migration gain of more than 20,000 people this year alone before the property market would show genuine signs of recovery. As at February, we had an annual gain of just 6600 people.

"We do not have a shortage of houses for our current population," he says.

VALUE FALLS

Information on value falls for each main city shows the recent worst-performing suburb and the predicted worst-performing suburb for the next six months:

Auckland
* Mt Roskill fell by 16 per cent
* Further downside suburb in next six months: Massey, West Auckland

Wellington
* Taita fell by 16 per cent
* Further downside suburb in next six months: Wainuiomata

Christchurch
* Central Christchurch fell by 15 per cent
* Further downside suburb in next six months: Bromley