Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


House prices to start falling by the end of year

House prices to start falling by the end of this year

Real estate agents and potential property buyers are in danger of overestimating the ongoing strength of New Zealand’s housing market, according to Infometrics.

An increase in the average house price of around 20% over the last year is fuelling expectations of further strong capital gains over 2004. But the factors pushing up prices over 2003 will not be as potent this year.

Population growth, a fundamental driver of demand for new housing, is slowing sharply as the net inflow of migrants evaporates. Over the six months to November, the net rate of arrivals has plunged from 3,650 per month to 1,020 (seasonally adjusted). That is sufficient to reduce population growth by one-third.

Demand for housing will also be cramped this year by rising mortgage rates. Pressure on the Reserve Bank to raise interest rates has currently been alleviated by the strong New Zealand dollar. However, Infometrics predicts that the official cash rate will still rise by at least half a percentage point this year with the currency likely to peak by mid-year. Higher rates will squeeze some buyers out of the market.

Despite demand beginning to tail off, the supply of new housing remains at a historically high level. The number of new dwelling consents over the last 12 months was almost 30,000, a 26-year high. Such a rapid rate of building in the face of slowing demand is a recipe for an oversupplied housing market and, consequently, falling house prices.

House prices are likely to climb further over the next six months, but Infometrics predicts that property values will begin to fall before the end of this year. While price falls may not be significant nationwide, some areas that have experienced large price increases (such as Nelson) could undergo a nasty correction.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Media Mega Merger: StuffMe Hearing Argues Over Moveable Feast

New Zealand's two largest news publishers are appealing against the Commerce Commission's rejection of the proposal to merge their operations. More>>


Approval: Northern Corridor Decision Released

The approval gives the green light to construction of the last link of Auckland’s Western Ring Route, providing an alternative route from South Auckland to the North Shore. More>>


Crown Accounts: $4.1 Billion Surplus

The New Zealand Government has achieved its third fiscal surplus in a row with the Crown accounts for the year ended 30 June 2017 showing an OBEGAL surplus of $4.1 billion, $2.2 billion stronger than last year, Finance Minister Steven Joyce says. More>>


Mycoplasma Bovis: One New Property Tests Positive

The newly identified property... was already under a Restricted Place notice under the Biosecurity Act. More>>

Accounting Scandal: Suspension Of Fuji Xerox From All-Of-Government Contract

General Manager of New Zealand Government Procurement John Ivil says, “FXNZ has been formally suspended from the Print Technology and Associated Services (PTAS) contract and terminated from the Office Supplies contract.” More>>