New Zealand House Prices Decline at Fastest Pace Since 2005

By Victoria Batchelor

Oct. 13 (Bloomberg) -- New Zealand house prices fell in September at the fastest annual pace in more than three years as an economic recession and a deepening global financial crisis deterred buyers.

Average prices dropped 5.8 percent from a year earlier, Quotable Value New Zealand Ltd., the government valuation agency, said in an e-mailed report today. That was the biggest decline since the series began in February 2005.

Falling property prices adds to signs the economy's slump is worsening and reinforces expectations the central bank will reduce interest rates for a third time this year when policy makers meet on Oct. 23. Consumers are reining in purchases as surging living costs and rising unemployment erode confidence.

``We've moved into an economic recession and there is plenty of speculation that things will get worse,'' said Mark Dow, a Christchurch-based spokesman for the valuation agency. ``There is little expectation of any spring resurgence in the property market, with consumers getting more concerned about the economic outlook and their job prospects.''

New Zealand's benchmark stock index slumped last week to a four-year low and the nation's currency tumbled to its weakest level since 2003.

Central bank Governor Alan Bollard lowered his benchmark lending rate by a half-point to 7.5 percent last month to try to revive an economy that shrank in the first two quarters of 2008, for its first recession in 10 years.

The Reserve Bank of New Zealand forecasts the economy also contracted in the third quarter. Bollard will cut borrowing costs again on Oct. 23, according to all 13 economists surveyed by Bloomberg News.

Home prices in Auckland slumped 7 percent and in Wellington by 5.4 percent, today's report showed. Price across the nation's 17 main urban centers dropped an average 6.8 percent.

To contact the reporter on this story: Victoria Batchelor in Wellington at vbatchelor@bloomberg.net