New Zealand house sales slumped to a seven-year low in December, adding to signs record-high interest rates are slowing the property market and economic growth.
House sales dropped 32 percent to 5,597 homes from 8,245 a year earlier, according to a report today from the Real Estate Institute of New Zealand Inc. e-mailed to Bloomberg News. Sales in December, which is traditionally a slower month for property, were the lowest since January 2001.
Reserve Bank Governor of New Zealand Alan Bollard, who raised the benchmark interest rate four times between March and July last year to a record 8.25 percent, welcomes a slowing property market because housing is the leading driver of consumer spending. As economic growth slows, Bollard may cut interest rates later this year, said economist Shamubeel Eaqub.
``We expect the property market downswing to broaden to a general economic slowdown,'' said Eaqub, economist at Goldman Sachs JBWere Ltd. in Auckland. ``As growth deteriorates and inflation concerns abate we expect interest-rate cuts from mid 2008.''
New Zealand's dollar bought 78.00 U.S. cents at 5:10 p.m. in Wellington from 77.80 cents immediately before the report was released.
Eaqub forecasts the economy will grow just 1.1 percent this year, less than half the 2.6 percent pace forecast by the central bank. He expects rate cuts beginning in June. Only one of 15 other economists surveyed by Bloomberg News agrees.
`Reached a Peak'
``A number of factors are impacting on the housing market, including the increased cost of home finance following rising interest rates,'' Murray Cleland, national president of the Real Estate Institute, said in a statement. ``The market may have reached a peak.''
A two-year fixed-rate home loan had an interest rate of 9.3 percent in November compared with 8.1 percent a year earlier, according to central bank figures.
Still, ``while successive interest-rate increases have impacted on the number of properties sold, prices remain steady,'' said Cleland.
The median house price rose 4.5 percent to NZ$345,000 ($268,000) from a year earlier, the institute said. The annual increase in prices was the weakest since June 2002. Prices fell from a record NZ$352,000 in November.
The median time it took to sell a house stood at 36 days from 29 days a year earlier, and 36 days in November, the institute said.
