BNZ chief economist Tony Alexander is defending the media against real estate industry accusations that it is to blame for the housing market slump.
Last week Alistair Helm, chief executive of realestate.co.nz, the website owned by the major agencies, said negative stories were driving down house prices.
But Alexander says if there's any blame to be attributed to the media, it would be "less than 5 per cent" of what is actually causing the market to correct.
Instead, he says the Reserve Bank has been explicitly trying to force a housing market correction for more than four years by raising interest rates.
Peter Thompson, director of Barfoot & Thompson, says the media have played a big role in the property downturn.
"The more you read in the news the more you believe it," he says. "We were hearing economists saying prices were going to fall anywhere between 10 and 30 per cent when, in reality, our figures and the Real Estate Institute's showed prices were holding their own."
However Alexander says the media didn't really "pick up aggressively" on the weakness in the housing market "until earlier this year when we saw the strong annual decline, and yet we could start to see the increase in the number of listings from the middle of last year".
Barfoot & Thompson's Auckland figures show new listings started increasing strongly in the June quarter of last year, when fixed mortgage rates reached 8.5 per cent and kept rising. "That's when we saw retail spending growth stop and vendors begin flooding the market with properties, as debt servicing costs are too high," Alexander says.
Real estate agents say buyers have been scared by the media, but Alexander says they started backing away in the June quarter last year because they were finding interest rates too high.
Alexander says he can understand why real estate agents are looking for someone to blame: "Not all of them want people to be highly informed about the true state of the market."
The challenge for real estate agents, he says, is to make vendors realise there is an oversupply of properties on the market, and so "negative commentary" is useful for convincing vendors to cut their price.
Vendors are already taking properties off the market, realising if they leave them sitting there unsold they become "tainted" properties - and buyers will only throw "extremely insulting" offers at them.
Owners are realising that they can get good rentals because there is a shortage of rental property around the country. Landlords with existing tenants are getting increases of 5-10 per cent. When tenants change, landlords are getting increases of 15-25 per cent.
Alexander says that some investors who have focused on short-term capital gains are now looking longer term because rents are improving. Over winter he expects to see more buying from "long-term yield-focused" investors looking for bargains from vendors who have to sell.
By spring he expects some of the better-capitalised first-home buyers to enter the market, encouraged by rising rents, a likely tax cut in October, wage increases, steady employment levels and falling interest rates.
"I expect by the end of this year, the two-year fixed housing rate will be close to 8 per cent as a result of the Reserve Bank potentially cutting interest rates quite quickly from September."
The market will stabilise over the first half of next year but the return of buyers in spring and summer will not be enough to create a new upward leg in the housing cycle, says Alexander.
By the middle of next year, however, there will be an undersupply of property, generating some price rises. This is because of rapidly falling residential construction as developers struggle to get finance.
Alexander's forecasts show that undersupply will be most intense in Queenstown-Lakes District, followed by Manukau, Rodney, Papakura, Wellington, then Waitakere.