How to describe the current situation in the property market?  I don’t think anyone’s put it better than NZIER principal economist Shamubeel Eaqub, who called it “a Mexican stand-off.”  With spurs jangling and moustaches quivering, Senor Buyer and El Vendore face off, pistols in their belts, fingers itching, unwilling to fire and unwilling to retreat.

The saloon is packed with overexcited types ready to comment on the tiniest twitch by either party.

February saw another increase in the mean asking price – it’s within a whisker (2%) of the peak asking price back in November 2007 .  But buyers are... Well, they’re not buying it.  The tumbleweeds blow through the sales landscape as buyers and vendors remain stubbornly convinced that they each know where prices should sit.  New property price highs are going to be what breaks the stalemate, and if asking prices are reaching near-highs then are prices set to follow?

When times get tight, investment properties might be sold, and if a landlord needs some cash the price will be a bargain.  But only the most tightly-stretched investor will sell his or her own family home – so we sit, and we wait, until the prices rise.  I live in an area where the property prices remain extremely buoyant, and that’s because this is where landlords actually live.  Our house was purchased in April 2007 at nearly the top of the market, and I know we won’t even think of selling until the prices are up to at least those levels again.

Because people who can pay their mortgages are just going to keep quietly chipping away at their debt, building equity and waiting for the market to match their expectations.  And eventually it will.  Rents are going up.  The supply of housing is failing to meet growing demand.  The stand-off can’t last much longer; I predict that spring 2011 will be the point where Senor Buyer and El Vendore spit on their palms and shake hands.