First Aucklanders were hit by falling house prices, then the smaller centres. Now it's the turn of our farmers. House prices across New Zealand will keep falling, according to a gloomy economic forecast contained within the Budget.
And ANZ National bank economist Cameron Bagrie thinks the continuing decline, largely city-focused
until now, will hit the provinces hard.
"As the global recession filters through to the dairy sector, we'll see falling house prices across the rural region."
Dairy districts, in particular, have been hit by a reduced milk price, which may force some off their farms entirely, and will leave all of them with less spending money. That will hurt everyone in rural New Zealand.
The Treasury blames rising unemployment for a predicted 8 per cent drop in house prices in the year to March 2010, and a further four percentage points in the year to March 2011 - on top of last year's 9 per cent fall.
The economic and fiscal update predicts this decline "will not only affect households' perceptions of wealth but will also severely constrain the ability of households to borrow against their houses to finance spending".
Residential investment will fall by just under 23 per cent in the March 2010 year, following a 25 per cent fall in the March 2009 year, the Budget predicts. Banks will continue to seek larger deposits before issuing home loans and annual building consents are at their lowest in more than 25 years.
"It is unlikely that the housing market will stage a significant recovery any time soon, with the risks tilted towards further declines in house prices as 2009 progresses."
It's grim, but not surprising, says economics writer Bernard Hickey, who runs interest.co.nz.
From their peak at the end of 2007, Hickey had predicted prices would fall 30 per cent. "It's taken longer than we thought, but we still expect another 20 per cent fall over the next couple of years."
The reason the decline will continue is because "house prices are fundamentally overvalued in New Zealand compared with incomes, particularly disposable incomes," says Hickey.
"The price of housing has practically doubled in the seven years to 2007 - 30 per cent off the top of that 100 per cent rise means we're still left with prices where they were in about 2004 and 2005."
And once prices stop declining at the end of 2011, it will be another seven or eight years - taking it to 2018 or 2019 - before they reach the peak levels of 2007 again, Hickey reckons.
