New Zealand house prices showed further signs of recovery in August after a year of sharp declines, data showed on Monday, supporting views the economy is emerging from its longest recession in more than 30 years.
Quotable Value's residential house price index fell 2.8 percent in the year to August 31, compared with a 5 percent decline in the previous month - the fifth month in a row the trend in property values has improved.
The government agency said prices have risen 1.9 percent since April and the number of houses sold was also above last year's historical lows. "The housing market is strongly driven by confidence, and that appears to be returning to the wider market," QV spokeswoman Glenda Whitehead said.
She said a general shortage of properties was leading to increased competition and higher prices, but it was unlikely that another housing boom was in the making.
"Although there has been an improvement in market sentiment, continuing doubts over job security, a lack of wage growth and tougher lending conditions are likely to limit increases in the medium term," Whitehead said.
The housing market, once a major inflationary concern for the Reserve Bank of New Zealand (RBNZ), peaked in late 2007, but fell sharply because of high borrowing costs and prices, while consumers cut their spending amid a deepening recession and rising unemployment.
The central bank has slashed interest rates by 575 basis points since last July to combat the downturn, which is expected to last through much of this year. A Reuters poll is forecasting the official cash rate will be held at a record low 2.5 percent when the RBNZ reviews rates on September 10.
The RBNZ, which previously forecast house prices to fall around 20 percent by early 2010 from their peak, said in its June statement that house price inflation was close to cyclical lows.
Fixed term lending rates for two years or longer have risen to reflect increased wholesale rates as investors have moved to lock in low rates in the expectation that the RBNZ will start raising rates as soon as early next year.