Kiernan said it was only now, after a five-year boom, that the property market was finally seeing signs of the long-predicted slowdown. Higher interest rates and the effect of the high Kiwi dollar on export incomes had combined to affect property prices in provincial areas, with Kaikoura and Mackenzie Country particularly hurting, he said.

The outlook is good for home buyers, definitely in Wellington and probably in Auckland, areas where employment growth and migration is still occurring. He said high numbers of new dwelling consents in the last months of 2006 suggested there would be an oversupply of new homes by mid-2007, which could keep house price growth down or at least stable. As a result, Kiernan said, property buyers would have more time to make decisions and not face 2006 pressures in paying top-dollar to get into the market and beat off competition.

The outlook is not so good for provincial areas. The catch-up boom of the last few years was all but over, Kiernan said. Coastal property areas and resort locations like Queenstown may also face a chill. "The wider economy is slowing and income growth is not quite as sure as, maybe, two years ago," he said. "One of the first things you cross off your list if things are a bit tight is a holiday home. I wouldn't pick a lot of growth in those over 2007."

Another thing: Expect status quo for investors and renters in 2007. "There is anecdotal evidence of too much rental property out there at the moment but at the same time affordability is pretty tough for first-home buyers." While some in the industry suspect some investors may sell properties to release equity, Kiernan's number-crunching suggests the trend will be really noticeable about 2010-2015 when a large number of baby boomers hit retirement.

STEPHEN HART
Publisher of Where To Live In Auckland


Slowdowns, chills, falls, levelling. These words were used relentlessly this year to describe the outlook for New Zealand's property market. But experts were wrong, largely underestimating the strength of the market. Even this month's sales are much more robust than the Reserve Bank's projections and the warnings of governor, Alan Bollard, who consistently bemoans New Zealanders' preoccupation with housing ahead of owning shares in companies.

"He's like an old fella standing on his porch, shaking his walking stick at the kids on bikes racing past," said BNZ chief economist Tony Alexander. So what will the market be like in 2007? Place your bets now as we ask the experts to give us their forecasts.

GARETH KIERMAN
Infometrics senior economist