New Zealand house-price inflation slowed to 15-month low in May
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NEW ZEALAND house-price inflation slowed to a 15-month low in May as housing credit grew more expensive, according to CoreLogic.
Prices advanced 15.3 per cent from a year earlier, CoreLogic New Zealand said Wednesday (Jun 1) in Wellington. That's slower than the 18.8 per cent pace in April and the weakest since February 2021. From a month earlier, prices slid 0.8 per cent, the property valuer said.
The Reserve Bank increased the Official Cash Rate by half a percentage point to 2 per cent last week and projected the benchmark could go as high as 4 per cent in 2023. As trading banks increase home-loan interest rates to match the aggressive tightening cycle, economists are predicting house prices will fall about 10 per cent this year and decline further through 2023.
"With housing credit tight and getting more expensive by the week, this trend toward weaker housing market conditions is likely to continue," said Nick Goodall, head of research at CoreLogic New Zealand
Higher mortgage costs "will require some severe tightening of other spending" which has the potential to weaken economic growth more broadly, he said. The 2-year home-loan interest rate is about 5.25 per cent.
The RBNZ says most borrowers won't be significantly impacted by higher rates when their loans roll over, but those who have entered the market in the past year may be more exposed. The central bank estimates that if mortgage interest rates get to 6 per cent then a third of all households who borrowed in the past 12 months will need to revisit their spending plans. That ratio rises to half if mortgages get to 7 per cent.
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Higher borrowing costs will also result in fewer residential transactions this year, Goodall said. CoreLogic now forecasts 78,000 sales in 2022, down from a previous projection of 92,000, he said. BLOOMBERG
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