Boom towns in for price shock

Research from economic forecasting firm Infometrics reveals New Zealand house prices will slip an average 0.8 per cent over the next year and about 5 per cent over the next two years.

Kaikoura and the Queenstown Lakes District are likely to bear the brunt of the slowdown and drop 9 per cent by June next year.

Infometrics senior economist Andrew Gawith said the long-term forecast would be a nasty surprise to those who had recently bought a new home. "But it pales into significance for the average homeowner who is wallowing in a 60 per cent capital gain since 2001."

The figures are less dramatic than those forecast in last November's Infometrics/PMI six-monthly report, which predicted a 4 per cent national slide this year. The latest analysis concedes the slowdown is still to come - but has also revealed how overvalued some of New Zealand's land has become.

Property prices in Kaikoura - most famous for its whale watching - are 82 per cent above a long-term property trend line which dates back 80 years.

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