The Reserve Bank has revised downward a prediction median house prices will fall up to 20 per cent in the recession, though sales volumes appear to be falling.
The institution is now picking a 13 per cent drop through the current economic downturn, despite latest Real Estate Institute figures showing the national median price - which had been picking up in the past few months - had dropped from $340,000 in April to $337,000 last month.
Governor Alan Bollard yesterday cited low mortgage interest rates and higher net immigration as factors that had boosted sales earlier this year.
However, people had since become more circumspect in their spending because financial and housing wealth had been adversely affected lately.
Concerns about job security were prompting more caution and tight credit was also playing a role, he said.
Rising mortgage rates and fears of more unemployment are two factors being blamed for causing the poor state of the house sales market.
NZIER principal economist Shamubeel Eaqub yesterday cited these along with tougher bank lending criteria as reasons why activity was so lacklustre.
REINZ figures yesterday showed 6291 houses sold nationally last month compared with 6210 in April. Institute president Mike Elford said the latest volumes were better than May last year when just 4372 places sold.
Vendors were refusing to take low prices and were not even putting their places on the market, he said.
The market's main problem was a severe shortage of supply, he said.
"With an apparent reluctance to sell in what is perceived to be a buyers' market, people are tending to hunker down and sit tight on their properties.
"This, combined with a seasonal trend for people to hibernate rather than put their home on the market in the winter months, has led to an acute shortage of houses on the market," he said.
He predicted more sales in the spring.
"Traditionally, people start thinking about selling around August and September as the weather warms up, but until then we expect turnover to remain consistent with the number of properties that are put on to the market," he said.
Mr Eaqub predicted the housing sector's fortunes would remain challenging.
"Rising fixed mortgage rates, which traditionally lead house sales by six months, are a clear risk. This is overlaid with the prospect of rising job losses, compounded by potentially stricter enforcement of conservative credit criteria.
He was heartened by some data out yesterday. "There were some signs of normality returning to the market. Days to sell is now 41 (seasonally adjusted) down from 55 just three months earlier."
Outlook brighter on house price fall
