Housing boom nearing end, say economists

The end is in sight for booming house prices with a new level of "unequivocal weakness" creeping into the sector, economists say.

BNZ chief economist Tony Alexander, citing Barfoot and Thompson's sales figures for last month, said yesterday: "There is unequivocal weakness revealed in the Auckland housing market in monthly data.

"Prices appear to have plateaued at best and there could be a downward trend under way."

Deutsche Bank senior economist Darren Gibbs said the housing market was moving back to equilibrium quickly and price inflation should dissipate rapidly, especially as the Reserve Bank had indicated its foot would be kept on the interest-rate brake for six months or more.

From 2001, the sector has had a bull run, continuing through to last year when the volume of sales peaked at 108,000 and the number of agents ballooned from 10,000 to 16,000.

Between 1997 and last year, property prices rose 85 per cent, the single biggest global increase of any country.

From the last quarter of 2004 to the final three months of last year, prices were up 16.8 per cent, the second-highest rise in the world after Denmark, where prices rose 17.7 per cent.

Bank of New Zealand chief executive Peter Thodey also said fewer mortgages were being written. Loan applications had slowed in the past month, particularly for investment housing.

Mortgage applications were strong during December and January and it was only last month that the bank noticed the investment property market slowing. But Thodey was cautious about calling an end to the housing boom, saying the market could go quiet for four to six weeks and then suddenly pick up again.

Reserve Bank Governor Alan Bollard said yesterday that the market appeared to be losing heat.

"Household spending has only recently started to wane," he said. "A key driver of strong household spending has been the buoyant housing market which, while showing signs of cooling, still remains active."

ASB chief economist Anthony Byett was more bearish.

"The Reserve Bank's view about timing could change quickly should further evidence of slowing housing and labour markets emerge."

Harcourt chief Bryan Thomson said prices would not rise as fast as they had in the past two years but volumes would still be high this year.

Harveys director Ross Hunter said mortgage rates were still "affordable" and people were holding property for a longer term. Ray White chief Carey Smith said 108,000 properties were sold last year and immigration would help keep the sector buoyant.Running hot

* Between 1997 and last year, property prices rose 85 per cent, the single biggest global increase of any country.

* The volume of sales peaked at 108,000 last year.

* From 2001, the number of agents ballooned from 10,000 to 16,000.