New Zealand’s house-price declines slow as rate hikes set to end
THE annual pace of New Zealand house-price declines slowed further in May, coinciding with the central bank signalling it may have concluded its 18-month policy tightening cycle.
Values fell 10.2 per cent from a year earlier, down from 10.3 per cent in April and 10.5 per cent in March, CoreLogic New Zealand said on Wednesday (May 31) in Wellington. From a month earlier, prices dropped 0.7 per cent.
The moderating pace of annual declines and the Reserve Bank of New Zealand’s (RBNZ) projection last week that the Official Cash Rate is unlikely to rise any further are being seen as a fillip to the property market. ANZ Bank this week predicted prices could begin to recover as early as the third quarter in response to looser monetary conditions and surging immigration.
“The RBNZ has effectively said now is the time to pause, and wait and see how this plays out,” said CoreLogic NZ Head of Research Nick Goodall. “This expected ceiling for interest rates reinforces our view that a possible floor in prices is approaching.”
Goodall said the RBNZ’s comments will be comforting for borrowers who face sharply higher mortgage repayments when they roll over fixed loans taken out in the past two or three years at much lower rates.
“Mortgage holders and aspiring home owners should now be able to quantify the worst-case scenario for their mortgage repayments which will give both them and their bank confidence in assessing serviceability,” he said.
While the rate outlook, higher immigration and a scarcity of homes being offered for sale provide confidence that the bottom of the market is approaching, it’s still unclear how strong the rebound will be.
“Affordability, hindered by high prices and contractionary monetary policy will likely keep a lid on demand for the foreseeable future,” said Goodall.
While the average house price slid to NZ$922,414 (S$750,798) in May, it remains NZ$194,000 higher than before the outbreak of Covid-19 in March 2020, CoreLogic said. BLOOMBERG
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