Buy up, says real estate chief

The head of the country's thriving real estate industry is encouraging homeowners to turn a deaf ear to housing crash predictions.

Real Estate Institute president Howard Morley told owners "pay as little attention as possible" to warnings about a crash from Reserve Bank Governor Alan Bollard.

Morley said economists and others who made these predictions were part of "a thriving but ultimately pointless little industry", including authors and headline-grabbers predicting a collapse.

It was "theoretical nonsense" to suggest the market was overvalued by 17 per cent, as one bank had this week.

Economists had said in 2002 that the market had peaked, but since then prices had risen by 57 per cent nationally. Some banks showed how strong they saw the market by lending 100 per cent of a home's value.

Latest institute figures show housing sales set a new national median price of $290,000 in August - 70 per cent higher than the $170,000 median price five years ago.

Bollard said yesterday house prices were cyclical and the upward trend would not be sustained. The household sector had relied heavily on mortgage debt to finance spending and might go through an "adjustment process" which he predicted would not be painless.

BNZ research head Stephen Toplis warned the market would "come unstuck", hit by rising interest rates, investors getting out of the rental market and falling migration.

House prices would be down next year, with no movement for three or four years. Prices could be up to 17 per cent overvalued long term.

THE NUMBERS

New Zealanders sell about 100,000 houses annually.

The industry generates work for 12,000 to 16,000 agents.

A new national median house price of $290,000 was set in August.

Prices are picked to break the $300,000 barrier soon.

The boom started in 2001 and shows few signs of cooling.