Demand for property in New Zealand remains sluggish

Country: New Zealand

4 February 2008

Home building permits in New Zealand fell to a six-year low in December 2007, supporting evidence that record-high interest rates are curbing demand for property.

The latest figures produced by Statistics New Zealand, shows that the number of residential planning approvals dropped 5.2% from November to 1,838. Excluding apartments, housing approvals have slumped 11% over the past year.

New Zealand’s cooling property market will further slow the country’s economy. It will also help reduce inflation pressures that prompted the Reserve Bank of New Zealand to raise borrowing costs four times last year to 8.25%.

Jarrod Kerr, an economist at JPMorgan Chase & Co in Sydney, said: “The Reserve Bank has done enough to rein in New Zealand's housing market… The cooling property market and easing home prices should help quell fears that domestically generated, housing-related inflation will rear its ugly head again.”

Home sales fell 32% to a seven-year low in December, according to Real Estate Institute figures.

Editor’s comment:
It’s not surprising that New Zealand’s property market has cooled. Recent data revealed that New Zealanders face the world’s largest disparity between actual earnings and domestic property prices. The country’s interest rates may fall this year, as a consequence of a slowing economy and housing market.

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