By CATHERINE HARRIS – The Press
Households could collectively save 2 per cent of their annual disposable income next year when they refix their mortgages at lower rates. The New Zealand Institute of Economic Research predicts that 35 per cent of all mortgages by value will be refinanced over the next year, cutting the total interest bill by around $2 billion. Not everyone would benefit, the institute cautions, as only a third of households have a mortgage. “There will be some people who will be receiving a significant windfall gain,” said NZIER chief economist Shamubeel Eaqub. That “considerable boost” to people’s pockets would be needed. The NZIER believes income will be reduced on average by about $10,500 per person in the next five years. Positives for the housing market were rising net migration and the low interest rates. With evidence that house sales were gaining traction, the institute said the preconditions were in place for a property market recovery but the biggest risk was job insecurity. “We’re now starting to see some signs that things are bottoming out,” said Mr Eaqub. “There’s a lot of stimulus in the pipeline but we need to keep in mind that the labour market is weak and that there may still be unwillingness to borrow, and to lend.” House-building was expected to remain in the doldrums for a while. The sector was set to contract by 35 per cent in the March 2010 year, compounding a near 27 per cent fall in the year to March this year. Annual residential consents have virtually halved from around 26,000 mid-last year but are projected to almost recover by 2013. They are expected to hit about 17,000 this year, due in part to increasing net migration and encouraging interest rates. Twenty-seven of the Philippine-based Global Property Guide’s 32 surveyed countries recorded price falls in real terms. Twelve countries recorded declines of more than 10 per cent, with Latvia plunging the most at 50 per cent. Dubai was next at 35 per cent and Singapore and Ireland at 22.7 per cent and 20.4 per cent respectively. New Zealand’s property prices slid 6.33 per cent, compared to a fall of 1.22 per cent for the year to March 2008. Australian house prices fell nearly 9 per cent. Only five countries experienced house price rises, with Switzerland topping the chart at 4.3 per cent and 3.5 per cent in Thailand. The guide said there was no clear sign of recovery in the market which started it all, the US. An inflation adjusted housing index there dropped 19 per cent. * The NZIER incorrectly reported its prediction that national GDP would shrink by $10,500 a year for five years, as reported yesterday. The institute’s chief economist Shamubeel Eaqub said the correct figure should have read $10,500 over five years.