KEY POINTS:
More like a stone skimming the surface of the water than a rock sinking - that's how the housing sector's fortunes are being forecast for the year ahead by the moderates.
Agents are keen on the soft-landing theory, promulgating the view that the market will flatten rather than collapse. But not everyone believes them.
Pessimists such as economist Rodney Dickens are talking more of "the hell that can unfold after house-price booms", referring to the need for a 40 per cent drop to get some balance back in the market.
"Scoff at this if you will, but it is an interesting coincidence that this roughly matches how much the New Zealand median house price would have to fall to get the gross rental yield on the average rented dwelling back up to the historical average level," said the former ASB research chief.
Anecdotal evidence of a flattening market includes the sheer volume of For Sale signs and honest but anonymous responses to the BNZ's monthly confidence surveys where agents admitted some open homes did not get a single visitor.
Banking economists cite more concrete evidence: flat prices throughout much of this year, a lengthening in the number of days to sell and national house price sales volumes which have almost halved in the past few months.
"House prices in New Zealand have essentially been flat since hitting $349,000 in April," said BNZ chief economist Tony Alexander.
House price inflation was running at its slowest pace in 4.5 years and it now took an average 34 days to sell, seven days longer than a year ago.
"We are moving into weak market territory. No surprise there," he said.
Desperate homeowners in some areas are selling for well below their registered valuations and analyst Kieran Trass reckons the slump will just get worse.
The McEwen Yield Report, published by analysts and advisers Investment Research Group, raised the dire scenario of a big slump, saying the sideways slide might occur but an all-out slump could not be ruled out.
"Is 2008 going to be the year of the property crash?" asked the report. David McEwen pointed out that when an asset category is on the wrong side of its long-term average benchmark - that is, above fair value - a day of reckoning eventually will come.
Dickens believes the Reserve Bank's attempts to slow the housing market achieved precisely the opposite. Instead of starving the monster, it fed it, just as he believes the British housing boom was sponsored by the Bank of England and the United States housing boom was fed by the Federal Reserve. And he doesn't particularly like this year's outlook.
"The recent fallout in the US housing market - falling house prices, collapsing residential building activity and the mortgage/liquidity crisis - give us some insights into what can happen when a central-bank sponsored housing boom turns nasty.
"The housing market will not be immune to fallout."
Agents take the opposite view.
Bryan Thomson, chief executive of Harcourts, said the housing sector had indeed cooled but price levels in most areas were remaining stable.
The number of properties for sale is still rising, which he reckons is good news for vendors and buyers.
Best-off are likely to be dairy farm owners, he reckons, as Fonterra's good fortune makes country folk richer than their city cousins.
Buyers should take the leap, he advises.
"Feel the fear and do it anyway!
"The biggest risk for buyers is that they procrastinate and miss out on a great property. But if you're clear about what you want and you do your homework you shouldn't be disappointed."
TRIFECTA TIPPED IN SUBURB STAKES
What are the hottest areas in Auckland? And which can we regard as the safest suburbs for buyers?
Agents picked three likely suburbs, based on characteristics like proximity to water and the CBD, affordability and having good schools and amenities.
Waiheke Island, Pakuranga and Mangere East emerged as Auckland's hottest suburbs, with median prices of $525,000, $609,000 and $427,000, respectively, and good growth prospects, according to NZ Property Magazine. In 1993, houses in these areas cost $86,000, $161,000 and $103,000, so they have all shown good growth. These three also have attractive characteristics which could make them winners through the fluctuations in the property cycle, the agents said.
Kieran Trass of SuburbWatch picked the top suburbs as Henderson, Glen Eden, Pt Chevalier, the Eastern Bays and Mt Roskill. He also picked Birkenhead.
HOT PROPERTY
Waiheke Island
Pakuranga
Mangere East
Henderson
Glen Eden
Pt Chevalier
Eastern Bays
Mt Roskill
Birkenhead
