In two articles today I read that property values across the land were returning to the same levels they were at during 2008, which sounds like pretty good news.

The information also noted that values in Tauranga are down 10.6 per cent since the market peak which is great news (early estimates were indicating that prices would drop by 20 per cent or more) but also news which may present a double edged sword. It is news like this that has most economists picking that Reserve Bank governor Alan Bollard will have to ‘renege' on his commitment to homeowners. Mr Bollard promised that the official interest rate will not be increased till the latter part of next year. With the housing market performing better than expected this is unlikely.
I find it interesting though because the rises are coming off very low rates which everybody seems to forget; after all let's say the market average dropped from $600,000 to $300,000 (extreme example to illustrate my point) and then came up strongly at a 20% rise, we would still only have an average of $360,000, which is well down on the peak of $600,000. This point seems to be ignored by most commentators.
Also in the lower end of the market there has been a lot of activity with some great results over the last six months due to lower interest rates and pressure from people down grading from the expensive homes they can no longer afford. But what about the high end of the Tauranga market?
Supposedly property values in Tauranga declined by 4.1 per cent over the past year (calculated over the three months ending August 2009 in comparison to the same period last year). The average sale price for the region decreased from to $415,156 to $412,320 and since I believe a high proportion of those property sales will in fact be properties in the lower end of the price spectrum, it is possible that the higher priced properties are still suffering. I would love to see what the mean price was.
Mr. Shayne Donovan-Grammer of QV Valuations supports this view when he commented in an article, 'Residential property values in Tauranga have been relatively stable over the past five months. The bulk of activity is still occurring in the under $350,000 bracket, which is having the affect of subduing the average sale price. The environment of low interest rates, sharp pricing and realistic vendors is making housing relatively affordable and is driving activity.”
This is great for that end but what is happening in the over $700,000 bracket?
'Some price brackets are desperately short of supply which has created the lift in values we have witnessed over recent months. For example, some properties previously selling in and around the $280,000 range are now selling for $300,000 or slightly above,” said Donovan-Grammer, which again is good news for those investors who bought when the prices dropped whilst interest rates were high and monetary policy was tight, however, what will things look like if Mr. Bollard reneges on his promise and starts to hike interest rates? One economist I read has picked that the official cash rate will be at 6.25 per cent by the end of 2011, which would put the variable rate back around the 8.5 per cent mark.