NEW Zealand's home-building approvals fell in November and home prices rose the least in nine months, adding to signs record-high interest rates are damping demand for property.
Permits granted to build new houses and apartments slipped 0.1 percent from October, the third straight decline, Statistics New Zealand said in Wellington yesterday. House prices rose 10 percent in December from a year earlier, according to Quotable Value New Zealand Ltd, a government valuation agency.
Yesterday's reports suggest the cooling real-estate market will further slow an economy that expanded at the weakest
pace in a year in the third quarter. Easing domestic demand may help curb inflation pressures that prompted Reserve Bank of New Zealand Governor Alan Bollard to raise borrowing costs four times last year, taking his benchmark to a record 8.25 percent.
"The Reserve Bank has well and truly tamed the housing market with its rate hikes," said Khoon Goh, an economist at ANZ National Bank Ltd in Wellington. "The data confirms that the housing market has turned and the higher prices are starting to ease."
New Zealand's NZX 50 Index fell 1.3 percent to 3,822.33 at 3:32pm in Wellington, heading for its lowest closing level since November 22, 2006. Shares in Fletcher Building Ltd, New Zealand's largest maker of construction materials, dropped 1.4 percent, the seventh consecutive decline.
The nation's currency traded at 78.54 US cents from 78.28 US cents late in New York last Friday. The yield on the 0-year government bond dropped two basis points to 6.27 percent.
New Zealand's economic growth slowed to 0.5 percent in the third quarter from the previous three months, the weakest rate in 12 months, as rising interest rates curbed consumer spending.
At his last two reviews, Bollard said he expects his benchmark interest rate to stay higher for longer as inflation remains close to the top of the central bank's one percent to three percent band.
Australia & New Zealand Banking Group Ltd and Westpac Banking Corp both increased the interest rates they charge on New Zealand mortgages in the past week.
"Ongoing weakness in building consents further removes one upside risk to inflation," said Joshua Williamson, a senior strategist at TD Securities Ltd in Sydney. "Housing had previously been an area of concern for the central bank."
Nine of 15 economists surveyed by Bloomberg News last month forecast the central bank will lower rates by the end of
2008 as economic growth moderates. One predicts higher rates by December. Most economists see no adjustment in rates until the second half.
Excluding apartments, approvals for buildings climbed 1.8 percent, the statistics bureau report showed.
The trend series for building approvals, which adjusts for seasonal variations and irregular events, fell four percent, the fifth straight decline.