The New Zealand Herald led its front page this morning with a story titled: "Experts tip: Now is the time to buy a house." It cited BNZ Chief Economist Tony Alexander as saying potential homebuyers who were confident of keeping their jobs shouldn't be holding back to try to pick a bottom in the housing cycle. Here's a taste of what the Herald and Alexander said.
Economists had proved they could not pick the top of the cycle, so no one should expect them to pick the low point, he (Alexander) warned. He believes real estate sales have probably almost reached their weakest level, and activity is likely to fluctuate and start moving up before the end of the year. House prices will possibly fall another 5 per cent, but will stabilise by the end of the year, then rise slightly next year, he says.
The NZ Herald also cites BIS Shrapnel Managing Director Robert Mellor as saying the housing market is likely to reach its lowest level in May. BIS Shrapnel is an Australian based housing research grop. Strategic Risk Analysis economist Rodney Dickens was cited as saying buying was starting to look more attractive than renting. What I think I forecast last March that house prices would fall around 30% on average from their November 2007 peak in the following two years. The REINZ median house price is down 7.7% from its peak and QV's measure shows prices down 8.3% from the peak.
I'm sticking to that 30% price fall forecast because the global economic catastrophe of the last 6 months is only now starting to lap at our shores and banks will be forced by New Zealand's foreign lenders to curb most new lending. Longer term fixed mortgage rates are also unlikely to fall much below 6% given the sharply higher cost of the foreign borrowing that once made these fixed mortgage deals so cheap. If you can wangle a 30% price cut (from the November 2007 peak) out of a stressed seller then it makes sense to buy now. If you haven't got that, it still doesn't make sense to buy as either an owner occupier or as a property investor. But your views? Comments below please.