It could be well into the first half of next year before the housing market picks up again, as consumer confidence starts to improve.
Bank of New Zealand chief economist Tony Alexander says there's no evidence yet that the strong rate of decline in housing turnover is easing. He also points out that house sales for July 2000 were the worst for any July on record, even worse than in the 1991 recession.
Writing in this month's New Zealand Observer, Alexander says there should be a seasonal upturn in sales over spring, "but the annual turnover is likely to keep falling towards 60,000 until maybe early 2001".
The number of housing permits issued for the year to July was 23,404, down from a peak of 26,635 in December. Given the lagged relationship between dwelling sales and permits as well as the strong negatives facing the housing market (including average house prices still three per cent above their long-term trend, worsening outward migration and oversupply in various housing categories), he's picking that permit numbers will probably fall over the rest of the year to a low of around 18,000.
More generally, Alexander is predicting that:
-
It will be another six to nine months before the export upturn has a positive effect on domestic spending,
-
Before then, times will be tough for home builders, real estate agents and others involved with housing,
-
Interest rates will keep rising, but by a maimum of 0.5 per cent over the next nine months.
"We don't expect any change in the Official Cash Rate come the next review on October 4, and consider it a less than 50 per cent chance an increase will occur on December 6 (the next two review dates)... The safest thing to say is probably that rates will be 0.25 per cent higher come the end of January.
"After that, one should not discount a further rates rise dependent upon what has happened by mid 2001 with consumer and business spending levels plus world growth and the exchange rate."
