New Zealand house prices fall for second month amid high rates and listings
NEW Zealand house prices fell for a second straight month in May, pressured by high interest rates and an increasing volume of properties for sale, according to CoreLogic.
Values dropped 0.2 per cent from April when they declined 0.1 per cent, the company said on Thursday (Jun 6) in Wellington. Prices rose 1 per cent from a year earlier.
Optimism that prices were recovering late last year has seen increased listings but buyers have remained cautious as the economy struggles to recover from a late-2023 recession. While mortgage interest rates look to have peaked, the Reserve Bank of New Zealand (RBNZ) has signalled that it is not ready to lower the Official Cash Rate (OCR) until 2025, adding to signs that home loans will remain expensive for the foreseeable future.
“With mortgage rates tipped to remain high for a while yet, it’s no surprise the market has lost a bit of the momentum we had been seeing through the early part of the year,” said Kelvin Davidson, chief property economist at CoreLogic. “An important factor still in play is the high stock of listings on the market, and the associated shift in buying power towards buyers.”
Last month, the RBNZ projected that the OCR would stay at 5.5 per cent until the third quarter of 2025 although economists argue a cut should come earlier as economic growth remains lacklustre.
The average two-year mortgage rate was 6.75 per cent in April, according to RBNZ data based on loans with a substantial deposit. That’s down from a peak of 7.01 per cent in November but is higher than 6.54 per cent a year earlier.
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Davidson said the outlook for house price growth in 2024 is subdued. He said listings may increase after Jul 1, when the centre-right government reduces the period of time before a property can be sold without incurring a tax on any profit.
“As many as 50,000 or so properties benefit to some degree from reduced risk of having to pay capital gains tax,” he said, adding that only a portion of those properties would actually be put up for sale.
Prices rose on an annual basis for a third straight month, after declining since late 2022. CoreLogic constructs its index on a rolling three-month basis using prices once settlement is agreed. That means its series lags other housing indicators that have shown prices starting to rise on an annual basis since late 2023.
SEE ALSO
The average house price fell to NZ$931,438 (S$775,649), according to CoreLogic data. Prices fell from a month earlier in three of the nation’s six biggest urban areas including the largest city Auckland, where they declined 0.8 per cent. BLOOMBERG
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