New Zealand house prices to rise 6% next year on lower interest rates By Reuters

By Devayani Sathyan

BENGALURU (Reuters) – New Zealand house prices are expected to reverse a recent slump and rise 6 percent next year as interest rate cuts from the Reserve Bank of New Zealand take effect, according to a Reuters poll of strategists real estate.

Despite aggressive interest rate hikes, New Zealand house prices are just 19% below their November 2021 peak, less than half of the more than 40% increase during the COVID-19 pandemic.

Although a sharp increase in interest rates from 0.25% to 5.50% from October 2021 to May 2023 did not lead to a housing market crash, it did tame an overheating market.

Median house prices fell nationally from this year’s peak of $800,000 ($500,960) in March to $753,000 in July, according to REINZ data.

The median forecast in an Aug. 20-30 survey of 11 housing market analysts estimated average price growth of 1.0 percent this calendar year, down from the 4.5 percent forecast in a May survey. Forecasts ranged from -4.0% to 2.5%.

This was in stark contrast to the 6.3% gains forecast for Australian house prices this year.

“While near-term momentum would suggest that house prices will remain weak in the coming months, certainly towards the end of the year and into 2025 we expect to see activity pick up as the impact of low mortgage rates wears off,” he said. Henry Russell, economist at ANZ.

“They are still facing a lot of difficulties in the market due to rising unemployment and a weaker economy. But on the other hand, it is still uncertain how much of an impact lower interest rates will have on the market and whether this will lead to more confidence returning. faster than we anticipate.”

The average home price was expected to increase by 6.0% and 5.0% next year and in 2026, respectively.

The RBNZ cut interest rates by 25 basis points at its August meeting and is expected to cut them by another 50 basis points this year and 125 basis points in 2025.

Asked what would happen to affordability for first-time home buyers next year, six of the eight analysts said it would improve. Two said it would get worse.

“Affordability should improve as we have substantial declines in interest rates. So that’s going to affect the actual debt service costs that people pay off,” said Nick Tuffley, chief economist at ASB Bank.

“There is greater confidence among people and that is likely to filter through to the housing market in the coming months.”

(More stories from Reuters Global Housing Survey Q3)

($1 = NZ$1.5969)

(Reporting and polling by Devayani Sathyan; Editing by Hari Kishan and Louise Heavens)