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NZ home price rise slowest in 6 months

Prices up 11.4% in Nov as higher rates curb demand

(WELLINGTON) New Zealand’s house prices rose at the slowest pace in six months in November, adding to signs that higher borrowing costs are curbing domestic demand.

House prices gained 11.4 per cent from a year earlier, according to a report released yesterday by Quotable Value New Zealand, the government valuation agency. That’s less than the 12.7 per cent annual pace in October and the slowest since May.

Reserve Bank governor Alan Bollard, who raised the benchmark interest rate four times between March and July to a record 8.25 per cent, said last week the housing market has slowed and will remain in decline as home loan interest rates increase. Home sales slumped 23 per cent in October from a year earlier, according to the Real Estate Institute.

‘The market continues to slow as the number of property sales decline and the time to sell increases,’ said a Quotable Value spokesman. ‘Buyers seem content to take their time before committing and sellers are reducing asking prices accordingly.’

In Auckland, listings of homes for sale are increasing, according to realtor Barfoot and Thompson. At the end of November, the company had more than 6,000 listings, the most since January 2002, it said.

‘Properties need to be priced realistically to sell within a reasonable timeframe,’ director Peter Thompson said.

Mr Bollard last week said he expected the benchmark official cash rate will stay at a record high for longer because of pressure on inflation. He said the effective mortgage interest rate faced by borrowers will rise further. The average interest rate on a two-year mortgage was 9.1 per cent in October, up from 8.1 per cent a year earlier, according to central bank figures.

 

Source: Bloomberg (Business Times 11 Dec 07)

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