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Wizard says no need for housing market panic

Wizard says no need for housing market panic

Tuesday, 8 June 2004: Commentators run the risk of creating unnecessary panic around a recent article in The Economist, which puts New Zealand at the top of a chart of house price rises in the world's developed countries over the past 12 months.

Wizard Home Loan's, Head of New Zealand John Grant says the doom and gloom scenario suggesting that the bubble is about to burst fails to take into account the fundamental differences between New Zealand and other markets.

"We are not Australia where property prices have increased by around 18 per cent in the past 12 months and over a massive 100 per cent in the past seven years. After Australia's long boom, their market is starting to slow, prompted by consecutive interest rate hikes and changes to stamp duty and land tax. Nor are we the UK market where the residential property boom has been running hot for many years now," said Mr Grant.

"New Zealand's fundamentals remain strong and I do not believe there are any substantial indicators that we are going to go into reverse. "

"The only major indicator showing a downward trend is migration which will cause activity to slow but should not, on its own, cause major gloom. In fact, when you consider other data that influences the market, such as building approval levels, interest rates, migration, inflation and wages, none are significantly shifting to suggest a major correction or bubble bursting, " he said.

"While The Economist puts the spotlight on New Zealand, consumers should not lose perspective. We top their table in 2004, but viewed over a seven year period from 1997 to 2004, New Zealand is ranked eleventh.

"The long term picture is vital to any talk of a housing boom or bust.

"Commentators need to be careful they don't themselves create a panic which scares off ordinary New Zealanders from investing in homes. By their very nature, the high-risk takers could be exposed but that would be the case regardless. Our clients, average homebuyers are not in this league.

"We have to be careful the doom and gloom hype doesn't become a self-perpetuating prophecy," he said.

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