KEY POINTS:
The national average home sale price is tipped to drop to about $300,000 when the market bottoms out - which may not be until 2009.
Deutsche Bank chief economist Darren Gibbs says while affordability has improved, it will be even better in 12 to 18 months. Then, buyers should be able to take advantage of a $308,000 average and "markedly lower" interest rates.
BNZ chief economist Tony Alexander agrees saying prices will keep dropping. "There's still a way to go." While ANZ chief economist Cameron Bagrie says buyers should be in "no hurry" to buy during 2008.
The predictions come as real estate agents reveal prices have plummeted by 10 per cent since a peak in November 2007 with no relief in sight from high interest rates. The Reserve Bank has been more conservative, forecasting only a 5 per cent drop in the average sale price.
Gibb's $308,000 average house price predictions are based in part on watching the effects of huge slumps in Britain and the US where drops follow a "massive boom period". The New Zealand housing market stands out as being overvalued to a similar degree as that of the UK - a market reportedly suffering its worst slump in 30 years, he says.
Gibbs says mid 2009 could be the best time to buy as there will not only be lower prices, but also "markedly lower" interest rates.
Real Estate Institute data shows the national average price is down to $349,000, from a record $352,000 in November and president, Murray Cleland, expects further weakening.
Most commentators agree the slowdown is only just beginning and first-time buyers locked out during the boom could benefit as overextended investors try to offload properties.
QV spokesman Blue Hancock says investors are looking to sell to reduce their exposure to increasing mortgage payments.
And with more properties being listed through bank-forced sales or the collapse of property investment schemes, Cleland expects more downward pressure on the market.
But Kieran Trass, founder of market monitoring site SuburbWatch.co.nz warns prospective buyers not to miss out by being too greedy.
"If you can get into the market now and you couldn't a year ago, why would you wait?"
Trass predicts property will get cheaper for the next two years, but says no one will know the perfect point to take advantage of the property slump until it's gone.
While there may be no rush, he advises those with a deposit saved to weigh up the advantages of leaving the "rent trap". Peter Thompson, director of Barfoot & Thompson, says despite the price drops, buyers should not overcommit financially as there could be unforseen events like job losses in future.
Buyers smiling again
Lisa Rutledge's first house-hunting foray literally ended in tears.
She went to look at a Mt Wellington house on the market for $450,000, which turned out to be beside pylons. "I sat in the car and cried," she says.
Despondent over the limited properties available and their high prices, Rutledge opted to rent in Ponsonby instead.
That was in 2006, the year after she'd returned from Britain with some money saved for a deposit.
Now 29, Rutledge owns international nanny agency KiwiOz Nannies, based in Parnell.
She began looking again last year and says she's "excited" about the buyers' market, and feels much more confident about making low offers when many are feeling the pinch.
Meanwhile, she says she's "lucky" to be paying affordable rent and living in a great area - Kingsland.
Rutledge wants to buy a two or three-bedroom property in central Auckland, preferably Mt Eden, Parnell or Grey Lynn.
"I will definitely be looking just at areas that are going to hold their value in the worst-case scenario of a slump lasting longer than predicted - as the boom did."
Because she will be living alone, Rutledge says she feels safe in those suburbs and doesn't want to be pushed further out.
Aware of the impact of taking out a mortgage in a high-interest environment, she is prepared to wait for rates to decrease.
