New Zealand House Prices Fall for First Time in Three Years

By Tracy Withers

Aug. 11 (Bloomberg) -- New Zealand's house prices fell from a year earlier for the first time in more than three years in July as record-high interest rates eroded demand for property.

Average prices fell 2.2 percent from a year earlier, Quotable Value New Zealand Ltd., the government valuation agency, said in a report released in Wellington today. That's the first decline since the monthly series began in February 2005.

Home-loan interest rates have soared the past year, forcing buyers out of the market and requiring vendors to accept lower prices. Reserve Bank of New Zealand Governor Alan Bollard said in June house prices will fall 7.7 percent this year and won't start rising until 2011.

``Many sellers are accepting the state of the market and dropping their expectations accordingly,'' said Blue Hancock, a spokeswoman for the government agency. ``The questions has now changed from when will prices stop rising to when can we expect to see them stabilize?''

Prices in Auckland, the nation's largest city, fell 3.6 percent. Wellington prices dropped 1.6 percent, Quotable Value said.

Global turmoil in credit markets has prompted lenders to raise borrowing costs by about 1 percentage point the past year, even as the central bank kept its benchmark interest rate unchanged at a record-high. Last month, Bollard cut borrowing costs for the first time in five years and said further declines are possible.

Home-loan approvals in July fell 27 percent from a year earlier, adding to signs that demand for new and existing homes is slowing, according to central bank figures.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net