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Official property values may be up but economists and real estate experts warn that the latest figures are not an accurate reflection of the housing market and there are signs it is cooling.
The Quotable Value monthly index rose at an annual rate of 11.1% in May, up from 10.6% in April and 9.8% in March while the average New Zealand sale price increased from $366,032 to $372,552 in the May survey.
The rises have come despite the Reserve Bank governor raising interest rates three times this year, most recently last week when he took the official cash rate to 8%. But those hikes may now be biting and the bank's master plan of cooling down the overheated market may be working.
While Quotable Value's latest report shows Palmerston North's property market is booming with prices up more than 14% in the May quarter in recent weeks agents say there have been definite signs of a slow down.
Marcus Watson from Watson Real Estate says numbers visiting open homes are down from two or three months ago and a number of buyers are thinking about things a bit more before they make an offer.
Westpac Chief Economist Brendan O'Donovan says there is still extremely strong momentum in the housing market but interest rates have reached such a level that the heat is going to eventually come out of it.
"When we are looking towards the end of this year I would expect the expecting market to be going sideways."
However if the sun is finally setting
on the long running boom, homeowners across NZ have benefited from
increased values based on local sales ranging from 9.5% in
Auckland, nearly 6.7% in Tauranga, 15% in Wellington, 12.4% in
Christchurch and a whopping 24.2% in Invercargill.
"You've got economic confidence in the economy generally and the housing market has performed incredibly well over the last few years," says Mark Dow from Quotable Value.
The high employment levels are being flagged as a driving force in the property market.
But economists say the property market can't be sustained as the full effects of recent interest rate rises kick in. And there have been indicators in the last 12 months that the market has been going off the boil, with a marked decrease in demand for investor funds and investment properties taking longer and longer to sell.
If New Zealand follows Australia and England on the path of self correction prices will plateau for as long as two years.
