House price falls more than 12 months away

Monday 5 January 2004

House prices are likely to rise a further 10% to 15% next year but they will fall "to some unforecastable extent" in 2005, according to Bank of New Zealand chief economist Tony Alexander.

By The Landlord

House prices are already about 10% above their long-term trend, exactly where they were the last time the housing market peaked in 1987.

Fueling the continuing boom are factors such as immigration, which while declining, should still be positive. "If we get an extra 20,000 people in the next year, that’s still a lot of demand for housing," he says.

Interest rates are still low, the labour market is tight and job security high, making people readier to take on debt than if they were worried about losing their jobs. Added to these factors are the clear investor preference for housing and the current shortage of builders.

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