New
Zealand homes are over-priced by 25 per cent and this "housing bubble"
is set to burst just as it did in the United States, the Economist has
warned.
The international magazine included New Zealand in a group
of countries - Australia, Belgium, Canada, France, Britain, the
Netherlands, Spain and Sweden - where it says property is "uncomfortably
overvalued".
These nine countries are at the same point as the
United States towards the peak of its housing bubble, claims the article
entitled House of Horrors.
"Another concern is that Australia,
Britain, Canada, the Netherlands, New Zealand, Spain and Sweden all have
even higher household-debt burdens in relation to income than America
did at the peak of its bubble," the article warns.
"Overvalued
prices and large debts leave households vulnerable to a rise in
unemployment or higher mortgage rates. A credit crunch or recession
could cause house prices to tumble in many more countries."
But
New Zealand real estate agency Barfoot & Thompson told the New
Zealand Herald the country's property prices were simply a
reflection of demand and supply.
"A lot of the houses these days
are sold by auction and when you have limited choice, especially in the
inner city, like (Auckland's) Mt Eden, Epsom, you get three or four
parties that are wanting that one property. That's how the prices go
up," the agency's managing director Peter Thompson said.
He rubbished the article for "basically calling all buyers and vendors fools".
Another
firm, Bayleys, accused the magazine of sweeping generalisations, and
said the market was setting the price and `savvy' New Zealanders were
benefiting.
The Economist isn't the first to challenge New Zealand
housing prices. The NZ Institute of Economic Research has warned it has
concerns and the international survey Demographia has consistently
placed New Zealand property among that most over-valued.
NZN