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The Reserve Bank has painted a grim picture for homeowners saying that house prices will continue to fall, but there is a glimmer of hope for mortgage interest rates.
On Thursday, Reserve Bank Governor Allan Bollard announced that the Official Cash Rate of 8.25% will stay the same.
The Reserve Bank predicts house prices will fall by 22% from last year's highs if inflation is taken into account.
The average house price was nearly $400,000 at the peak of the property boom last March. If the bank's forecast is correct, nearly $80,000 would be shaved off the average house value.
With the house market already softening, some owners are not prepared to risk selling and some have been withdrawing their property from the market rather than take a lower price.
"I don't think you'll get what your property's worth. I think people will be offering you less," says a member of the public.
The good news for homeowners is that Bollard signalled a cut in the Official Cash Rate later in the year.
This will impact the cost of home mortgages, although the bank has warned that it may take a while to take percolate. It says the effective cost of mortgage borrowing will continue to rise over the next 12 months.
ANZ chief economist Cameron Bagrie says the interest rate cut is encouraging as it will put money in New Zealanders' pockets.
And, ONE News political editor Guyon Espiner says the interest rate cut may be timed well for Labour as it will likely happen just before election which is expected to be mid October or early November.
Personal tax cuts also come into effect on October 1.
The interest OCR cut will happen despite rising prices with
inflation expected to hit an 18-year high of 4.7%.
