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“Berserk” New Zealand house price rises to calm next year, fall in 2023

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Vivek Maishra

BENGALURU (Reuters] – New Zealand house prices will fall in 2019 and 2023 respectively, however affordability could worsen on one of the largest property markets worldwide, according to a Reuters poll.

New Zealand has seen a remarkable recovery in its economy due to the economic downturn caused by the pandemic. However, it is now seeing a rise in house prices.

Expect them to grow 25% next year. They have already doubled in seven of the past seven years, which makes New Zealand’s property market the most affordable in the entire world.

This has led to increased scrutiny of New Zealand’s Reserve Bank, which has been held responsible for the recent property boom.

The market has been cooled by no government measures, which leaves new homeowners in ever greater debt.

With housing market tensions continuing to be intense, house prices continue rising at an alarming rate. Brad Olsen from Infometrics, Wellington senior economist said that the goalposts are being moved further away for many potential homeowners.

A Reuters survey of 10 analysts in the property market found that home price growth was expected to fall to 4.0% by 2022. This is according to a Nov. 18-25 poll.

According to poll, RBNZ tightening next year will likely end the boom in house prices, which would lead to a 2.5% decline by 2023.

Sharon Zollner (chief economist, ANZ) stated that FOMO (fear or missing out), is a typical characterisation of today’s housing market’s animal spirits’.

“Taking a look at the noise we believe that we are past the peak in the current inflation cycle. However, the pace of moderation remains uncertain.”

Housing crisis and economic impacts of COVID-19 has led to an increase in homelessness and increased inequality.

This is a problem for the Labour Party-led government led by Prime Minister Jacinda Adern. She came to power in 2017, promising a halt to property investors’ free rein and affordable housing.

Two respondents, except for one, answered an additional question that asked about affordability and stated they believed it would get worse over the next two or three years.

Infometrics’ Olsen stated that for every potential buyer who moves forward, the line is 10 steps farther away. Although affordability will not materially improve over the next few decades, it might stop getting worse very soon.”

All seven analysts in the property market said that higher interest rates and tighter monetary policies will have the greatest impact on house price next year.

The median forecast for 200 was given by six analysts, who also answered a question regarding how high interest rates must rise in order to substantially slow the housing market. Predictions ranged between 75 and 300.

Justin Fabo (senior economist at Macquarie) stated, “New Zealand households have high leverage so it won’t take much of a rise in interest rates for slow down house prices significantly,”.

(For additional stories, see the Reuters Quarterly Housing Market Polls:

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