Vivek Maishra

BENGALURU (Reuters), – Rising home prices in New Zealand are expected to slow down this year, and Australia in 2023. Higher interest rates could result in Australia becoming more affordable for homeowners in both countries. A Reuters poll forecast that Australia would be the next victim.

The multi-year boom of house prices on the basis of near-zero interest rates has given homeowners record amounts of equity, but it is making home ownership more difficult for those with lower incomes.

The pandemic has seen house prices rise by double-digits in each country, with New Zealand seeing the largest increase at almost 30%. The property market in New Zealand is currently the most expensive among OECD members.

However, wages are not keeping up with living expenses. This is in addition to the additional burden of the Reserve Bank of New Zealand’s three rate increases since October and other interest rate rises that will follow. Markets should be reacted quickly.

According to Reuters, New Zealand’s average home price fell 1.0% in the February 9-24 Reuters survey of analysts from property markets. The average home price in New Zealand was expected to rise 1.5% by 2023, and 2.7% by 2024.

“Prices can’t go up forever…pandemic-era policy stimulus sent prices into the stratosphere and (now) we are already seeing the housing market slow down in New Zealand pretty quickly,” said Jeremy Couchman, senior economist at Kiwibank.

But affordability remains a concern. Prices are likely to drop a bit; however, it is difficult to put together a deposit to buy a first home. They will have to work hard, unfortunately.”

New Zealand saw its average house price surpass NZ$1million for the first times. The median answer to a question about the New Zealand home prices was 9 on a scale from 1-10, ranging from very cheap to extremely costly. It was 10.

Mike Jones (senior economist, ASB Bank) stated, “We are not talking about large drops in house prices 2022. So I don’t expect it will become a buyer’s market.”

As more supply becomes available, the balance of power will shift towards buyers. Rising interest rates have a significant impact on housing demand.

Due to record-low interest rates, Australia’s prices are expected to increase 6.7% in 2019, after almost doubled during the global financial crisis.

The rapid increase in house prices was expected to end by next year, and to fall to 5%.

Adelaide Timbrell (an ANZ senior economist) stated that the 20% plus increase in house prices in the last year will not be replicated in 2022. “In 2023 we expect prices to fall modestly as lower mortgage rates bite.”

Australia’s central bank will increase interest rates in the third quarter for the first-time in a decade, slightly earlier than was expected in a separate Reuters poll. [AU/INT]