Property Focus as seen and assessed by the National Bank of New Zealand;

Summary

Our monthly Property Focus publication is aimed at providing investors and prospective homeowners with an independent appraisal of recent developments in the property market, as well as our favoured mortgage borrowing strategy. In this issue we comment on the turmoil around the globe and update our regional demand-supply housing balance measures for data to June.

The month in review

The aggressive interest rate cut by the Reserve Bank in early spring foreshadows the direction for mortgage rates over the next four seasons. Meanwhile, house sales and consent issuance remain in the doldrums.

Property gauges

Following the Reserve Bank's aggressive 50bp cut to the Official Cash Rate, mortgage rates have fallen. House prices have edged down, and accordingly so too has house affordability, as it continues the descent from a recent high. A dark cloud on the horizon is a weaker outlook for the global economy, which will dampen prospects here for a while yet.

Economic backdrop

A patchy period of economic growth can be expected as the economic drivers switch from the spending to the earning side of the economy and the economy continues to "rebalance". Meanwhile, the credit related economic slowdown that began in the US, has spread to other corners of the globe and this presents a key risk for the NZ economy.

Mortgage borrowing strategy

With the RBNZ accelerating and front-loading the easing cycle, the big picture remains tilted towards relatively short-dated borrowing. We continue to recommend targeting a rate of one year.

Comment - Global watch

We've seen a lot of turmoil of late, in what some commentators are saying is the worst financial crisis since the 1930's. While we need to be wary of "Chicken Little" style analysis, NZ will be impacted. While the Reserve Bank is throwing an interest rate lifeline to the housing market, the collective impact on the entire economy is still negative.

Feature article - Housing supply vs. demand balance

We have updated our demand-supply housing balance measures for data to June. In summary, the analysis confirms what is widely acknowledged - it's a buyers market at the moment.

At the National Bank we're always reviewing our services to ensure they're as up to date and relevant as possible. So from the next issue of Property Focus, you'll notice a new look to the email notification we send you - although the content of the report will still be the same.

The above is a contribution from the Nationa Bank