New Zealand house-price recovery remains modest, says consultancy
The interest rate on a two-year fixed-rate home loan is below 5% at most local banks, the lowest since March 2022, although it is uncertain how much further borrowing costs will decline
[WELLINGTON] New Zealand house prices rose for the first time in three months, adding to signs of a modest recovery as interest rates fall.
Prices gained 0.2 per cent in June from May, when they dropped 0.1 per cent, property consultancy Cotality said on Thursday (Jul 3). That lifted values back to February levels, while the 0.7 per cent annual decline was the smallest since September.
New Zealand’s property market lacks any strong momentum even after an aggressive series of rate cuts by the central bank, mainly because of a large overhang of houses for sale that favours buyers and keeps a lid on values. A sluggish economy and rising unemployment are also curbing enthusiasm to borrow.
“The subdued labour market remains an important factor,” said Kelvin Davidson, chief property economist at Cotality in Wellington. “It’s not only the direct job losses that are problematic, but a reduction in security for those who have kept their jobs will also be weighing on the property market.”
Filled jobs are down to levels last seen in early 2023 as global uncertainty makes employers cautious about hiring. Economists expect the jobless rate to creep higher this year from 5.1 per cent in the first quarter.
The interest rate on a two-year fixed-rate home loan is below 5 per cent at most local banks, the lowest since March 2022, although it is uncertain how much further borrowing costs will decline.
The Reserve Bank of New Zealand (RBNZ) has cut the Official Cash Rate (OCR) by 225 basis points to 3.25 per cent but in May removed an explicit easing bias, and economists at the four largest local banks expect policymakers will pause at next week’s meeting. There is less than a 50 per cent chance of the OCR falling below 3 per cent this year, swaps data show.
House prices have risen less than 1 per cent in the six months to June, and Davidson expects no more than a 3 per cent increase for the year to December, less than the 5 per cent he had previously projected. The RBNZ has projected 3.5 per cent.
“For every upwards influence on the housing market at present, you can probably find a downwards factor,” he said.
“In this environment where buyers have the upper hand and economic sentiment remains subdued, it’s hard to see these flat market conditions suddenly turning around within a month or two.” BLOOMBERG
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