New Zealand home prices hit three-year low, threatening recovery
Prices are now 18% below their January 2022 peak
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NEW Zealand’s home prices dropped to the lowest level in more than three years in August, prolonging a slump that began in early 2022 and clouding the outlook for domestic demand as a driver of economic recovery.
The Home Value Index declined 0.4 per cent from July, when it fell a revised 0.5 per cent, property consultancy Cotality said on Friday (Sep 4) in Wellington. Prices are now 18 per cent below their January 2022 peak.
The result adds to a squeeze on households already struggling with surging fuel costs and rising unemployment, implying consumer spending will remain subdued.
The Reserve Bank, which this week raised interest rates for a second straight meeting, sees the current recovery as uneven: while exports and tourism are advancing, consumption and investment are trailing behind.
“The housing market remains in a holding pattern, which seems set to last into next year,” said Kelvin Davidson, chief property economist at Cotality. “There’s no sign of a sharp downturn but equally there’s no catalyst for stronger growth in the near term.”
The RBNZ raised its Official Cash Rate to 2.75 per cent on Wednesday as it seeks to head off building inflation pressures.
Policymakers signalled a further increase is likely, while suggesting they will take time to assess how the economy is responding to tightening already delivered.
“Economic uncertainty, rising mortgage rates and a high level of properties available for sale are giving buyers little reason to rush,” said Davidson.
The lead-up to a general election in early November is also pushing investors to the sidelines as they are unclear about future tax policy, he said.
The center-right coalition government is struggling ahead of the Nov 7 ballot. The ruling National Party trails in opinion polls as voters grow weary of its claims to be the superior economic manager at a time when the recovery is still struggling for traction.
The housing downturn is expected to be much longer than after the Global Financial Crisis, when New Zealand house values fell 10 per cent but were back to pre-crisis levels in less than five years, Cotality said last month.
The property market, weak income growth and job insecurity are weighing on household spending and domestic demand, the RBNZ said in its Monetary Policy Statement.
Prices are expected to fall 0.5 per cent in 2026 and begin a modest recovery thereafter, increasing 2.4 per cent in 2027 and 5.2 per cent in 2028, the RBNZ projected.
“Until the labour market and job security improve more emphatically, which may not be until we’re well into 2027, consistent growth in house prices seems a low probability,” said Davidson. BLOOMBERG
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