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The average sale price decreased to $388,894 this month from $393,240 last month.
However the market slowdown is only just beginning according to one economist. Darren Gibbs of Deutsche Bank is predicting that by the time the market hits its bottom, the average sale price will be $300,000.
He is picking that house prices have a further 10% to fall, saying they are too far out of equilibrium with incomes and rents.
QV spokesperson Blue Hancock says the drop in average sale price reflects more activity at the bottom end of the market, and less at the top, rather than any significant drop in value.
“Many investors may be seeking to reduce their exposure to increasing mortgage costs, and having made good capital gains over the last few years are now looking to sell,” says Hancock.
Gibbs agrees many investors may have to sell, saying he’d be surprised if many investors would have foreseen how quickly the market would come off. The pressure on interest rates from the credit crunch couldn’t have been foreseen either.
Property that will be hit the hardest, says Gibbs, is that where there has been the most speculation – such as sections, apartments and beach houses.
Localities outside of Auckland will continue to hold up better because Auckland is so unaffordable and highly leveraged, says Gibbs. Areas supported by the dairy boom, and Wellington – supported by the government sector – will be the least impacted.
Gibbs says turnover levels might be close to hitting their lowest point, given some people may take their properties back off the market as we head into the winter months.
Downward pressure on prices will continue all year and into next year, says Gibbs, as there won’t be rates relief from the Reserve Bank during that period given the inflationary environment.
To see what is happening in the main regions CLICK HERE
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