As reported in the Timaru Herald on 29 Oct

Low interest rates are failing to kick-start Timaru's sluggish real-estate market.

Real Estate Institute New Zealand's South Canterbury spokesman, Warwick Jones, said yesterday's announcement that the official cash rate (OCR) would remain at 3 per cent was a good move, as the economy remained "very sluggish".

"It is probably for the best that he (Reserve Bank Governor Alan Bollard) holds the interest rates at this level for at least a little while longer," he said. "It is hard to know when the situation is going to change. No-one is spending at the moment, and people just don't have much confidence right now."

Dr Bollard said yesterday that the OCR – which affects the price of borrowing money in New Zealand and provides the Reserve Bank with a means of influencing the level of economic activity and inflation – would be held at this rate for a while as New Zealanders focus on repaying debt rather than ramping up spending.

Though this was holding back the economy, Dr Bollard said the "subdued state of domestic demand" suggested the Government's 2.5-percentage points hike to consumption tax will have "limited impact on medium-term inflation expectations".

Mr Jones said this year had been particularly slow, despite some favourable conditions.

In September, REINZ recorded 35 home sales in Timaru at a median sale price of $200,000. The average length for selling was 66 days. Mr Jones said this was down on even the same period last year, when REINZ had recorded 56 sales at a median sale price of $218,750, with an average length for selling of 27 days.

For the rest of South Canterbury, there were 12 recorded sales at a median sale price of $225,000, compared with the same period last year, when 29 sales were registered at a median price of $196,000.

"The market has slowed down dramatically," he said.

"The climate is actually very good for first-time buyers, interest rates are favourable as are median prices.

"Timaru has all the infrastructure to allow for more people to come here."

He said he was "at a loss" as to when the situation could improve.

"I just think it comes down to people's job insecurity right now. People are very cautious."

Mortgage broker and advisor Malcolm McDonald said he was not surprised by yesterday's Reserve Bank announcement.

"Nobody has been expecting rates to go up, and we are not close to a recovery yet, so obviously it is good news," he said.

Mr McDonald said he had been noticing "some movement" in the real estate sector as of late, but several factors had been holding it back, such as lack of job security, people being more cautious, and less freely available credit from banks.
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"It is going to take a long time for things to recover, you won't suddenly see a storm cloud of sales," he said. "For some people, it has been a very difficult couple of years."