10 Sep 2008

House prices down 5.7%

8:35 pm on 10 September 2008

Latest property market figures show house sales have slumped to a record low.

The Real Estate Institute says the national median house price in August was $330,000, a drop of 5.7% compared with a year ago.

Sales dropped to 4220, the lowest level since the institute began keeping records 26 years ago.

National president Murray Cleland says predictions of a fall of between 5% and 10% appear to be accurate, but he believes the market will stabilise by the end of the year.

Mr Cleland says much will depend on whether the Reserve Bank will again lower the Official Cash Rate.

The bank is expected to cut interest rates to 7.75%.

The Official Cash Rate was lowered to 8% from 8.25% on 24 July. It was the first cut since July 2003. Governor Alan Bollard said that inflation of 5% was expected.

Tax cuts take effect on 1 October. Finance Minister Michael Cullen said in July that the Government would post bigger deficits than forecast in the Budget in May as a result.