QVNZ house price series post slowest growth in three years
(See attached file: NZ_QVNZ_10mar08.pdf [full release with charts])
According to the latest report by QVNZ, annual growth in New Zealand residential property prices decelerated to 7.7%
(from 8.9% in January); this is the slowest annual growth rate since the monthly series began in 2005. Annual growth
rates fell in all major cities. The average sale price did increase marginally in February (up to NZ$393,240 from
NZ$390,636 in January), but remains below the recent peak in October 2007. The deterioration in New Zealand's housing
market comes on the back of high and rising interest rates, and reduced net-permanent migration flows. Despite the RBNZ
being on hold since last July, local banks are passing on higher costs of funding (owing to the credit market turmoil),
and net-permanent migration looks set to turn to a net outflow in coming months.
The deterioration in New Zealand's housing market was acknowledged in last week's monetary policy statement from the
RBNZ, with the central bank incorporating a 5% decline in house prices this year in their forecasts. JPMorgan also
expects a decline of 5% this year, but the downside risks to that forecast are growing by the week. The follow-on impact
of a deteriorating housing market on consumption growth and residential investment are obvious, and point to weakening
GDP growth this year and next.
The next key data-point to watch is the REINZ indicators out later in the week. The QVNZ series is a three-month
moving-average, and as a result is a much smoother, but slower turning, house price series. The data is also based on
settlement dated information, making it more lagged than the REINZ equivalent. Therefore, the REINZ’s days to sell and
volumes sold series are more timely indicators of turning points in the market - both series have recently fallen
sharply and point to continued declines in house prices.
See... NZ_QVNZ_10mar08.pdf [full release with charts])