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A "do-nothing" sentiment has gripped the property market where the number of house sales has dropped around a third from a year ago, according to the July report by QV.
Property values have now dropped 0.8 percent since March, after rising 4.9 percent in the prior eight months, QV said.
As a result, values are now 4.1 percent above the same time last year, and 4.7 percent below the market peak of late 2007.
And fewer people are expecting house prices to rise and most expect mortgage rates to increase over the next 12 months, according to the latest ASB Housing Confidence Survey.
A lack of buyer demand, combined with an increasing supply of unsold houses is causing values to gradually drop, QV said.
However, the average sales price increased slightly from $404,715 to $407,191 but this is because relatively few lower value properties are selling.
"The number of house sales in recent months has dropped around one third from the same time last year, and is also around one third below the long term average. We are now approaching similar levels of sales as during 2008 at the height of the recession," said QV.co.nz research director Jonno Ingerson.
An increasing number of people appear to be shelving plans to buy houses and are instead focusing on reducing debt. Of those potential buyers that remain active, some are finding it difficult to secure lending from banks, while others feel they are in the driving seat, have time to do their research, and only make sharp offers, said Mr Ingerson.
"Unlike 2008 when the overwhelming negative sentiment of the global economic crisis drove house values down, we are now seeing more of a 'do-nothing' sentiment."
Auckland area values are 6.9 percent above last year. A month ago they were up 7.9 percent above last year.
Recent declines in values in the Wellington area mean that values are now only 3.2 percent above last year, down from the 5.4 percent reported last month.
Values have been flat in recent months in Christchurch and are now 4.6 percent above last year. Dunedin values are now 3.7 percent above last year, down from the 5.8 percent reported last month.
In contrast to the other main centres, values in both Hamilton and Tauranga have been relatively stable for the last year. As a result Hamilton is only 0.3 percent above last year and Tauranga 0.5 percent.
Values in most of the provincial centres remain above the same time last year, although the gap is closing.
Napier (4.7 percent), New Plymouth (4.3), Wanganui (2.6%), Palmerston North (2.3) Nelson (3.1) and Invercargill (5.3) all remain above last year.
Rotorua (1.4 percent), Gisborne (0.6 percent) and Queenstown Lakes (-0.2) all have values similar to the same time last year.
Values in Whangarei have continued to drop since late 2009 and are now 2.6 percent below the same time last year.
FEWER EXPECT PRICES TO RISE
ASB's housing confidence survey, for the three months to July, found 19 percent expect house prices to increase in the next year, down from 35 percent in the previous quarter, and 71 percent expect mortgage interest rates to rise in the same period.
ASB chief economist Nick Tuffley said housing confidence was unchanged during the three months to July, with a net 29 percent of respondents still saying now was a good time to buy a house.
"Expectations for further rises in house prices have fallen across the regions, with the decline particularly evident in Auckland.
"Almost three quarters of respondents expect interest rates to rise. This result is in line with recent data showing signs of a continued slow down in housing market activity."
The median number of days taken to sell a house had continued to edge up and was now above the long-term average.
The bank expected the outlook for the housing market to remain subdued given waning housing turnover. Beyond 2010, it forecasted weak house price growth, tempered somewhat by population growth and net migration, Mr Tuffley said.
MORTGAGEE SALES INCREASING
Meanwhile, an increasing number of family homes are going through mortgagee sales.
Data from property information company Terralink International showed there were 264 mortgagee sales in May, 18 more than in April.
Terralink managing director Mike Donald said 50 percent of mortgagee sales in May 2009 were for properties owned by an individual, rather than a business, this had risen to 62 percent in May this year.
One in five of those sales was by someone who lost their only home.
"We all thought last year was a bad year for mortgagee sales when we reached record high numbers. Most of those were property investors who had over-extended themselves during the property boom. This year the pain has shifted to ordinary New Zealand families," Mr Donald said.
Hardest hit were property owners in Bay of Plenty, Waikato and Manawatu .
Mr Donald said mortgagee sales were usually the end result of many months of financial hardship for the property owner.
He expected pressure on property owners to continue for some time yet.
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