RBNZ forecasts big drop in house prices

The Reserve Bank is predicting a 12 per cent slump in house prices over the next year and a half.

The central bank said in its June Monetary Policy Statement that the housing market was slowing much faster than expected and that prices would now drop 12 per cent from their November 2007 peaks over the ensuing 18 months.

This is up from forecast for a 8 per cent drop in its last Statement in March.

Effective mortgage rates would not start falling until well into 2009, which combined with lower migration and tighter credit policies meant the housing market would continue slumping.

- INTEREST.CO.NZ