RBNZ chief warns New Zealand home prices will keep falling

Published Wed, Aug 17, 2022 · 01:47 PM

THE Reserve Bank of New Zealand (RBNZ) forecast home prices will keep sliding, as it hiked interest rates by half a point for the fourth straight meeting, with governor Adrian Orr saying the central bank has clearly signalled risks to homebuyers. 

“The central projection assumes that prices will continue to decline until the September 2023 quarter,” the RBNZ said in a statement. “This would result in a total decline of 15 per cent from the December 2021 quarter peak, slightly more than assumed in the May Statement.”

The Real Estate Institute’s price index slid 2.9 per cent from a year earlier, the first fall since 2011, the group said last week. The gauge has dropped for 5 consecutive months. 

At a press briefing in Wellington, Orr was asked what he would say to those who have bought homes only to see prices drop and mortgage-servicing costs rise. Recent buyers should expect some belt-tightening, he said.

“First and foremost we aren’t heartless,” Orr said, underlining that the RBNZ has done its best to signal over the past couple of years that it viewed home prices as unsustainable and that they would be coming down. 

The central bank has tried to send a clear message, he said: “There’s no such thing as a one-way bet.”

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In its statement, the RBNZ acknowledged that “higher interest rates and rising costs of living are putting pressure on household finances” and will affect both spending and home prices.

“House prices have steadily dropped from high levels since November last year, and are expected to keep falling over the coming year towards more sustainable levels,” it said. BLOOMBERG

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