Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

New Zealand house prices could drop 20% from peak levels

New Zealand house prices

Real Estate Institute figures showed the number of houses sold was down almost 30% in April compared to March and the national median price dropped 1.7% over the same period

ASB is warning that house prices could drop 20% from their peaks, when adjusted for inflation.

The housing market has been in retreat this year. Real Estate Institute figures released this week showed the number of houses sold was down almost 30% in April compared to March and the national median price dropped 1.7% over the same period. It was down about 5% nationally.

ASB’s economists said ‘three big housing nasties’ it had highlighted last year as potential risks to the housing market had arrived all at once – tighter credit conditions, higher mortgage rates and increased supply of new housing.

They said the bulk of the impact of rising mortgages was yet to be felt because it took about six months to filter through to prices.

About 60% of mortgages are due to be reset in the next 12 months, including those on floating rates. Almost all would go on to significantly higher rates.

They said it was the ‘credit crunch’ of new responsible lending rules and tight LVR restrictions that had ‘tipped the housing market scales’. While things could soon ease on that front but that would happen as the mortgage rate pain hit.

The large and rapid increases in mortgage rates over the second half of last year will be starting to fully impact the market around now, with the impact ramping up as the year goes on. The sheer speed with which mortgage rates have risen – amongst the fastest pace on record – will pose big headwinds for house prices over the second half of this year, they said.

In total, they expected a 12% peak-to-trough decline, taking house prices back to where they were in early 2021, and still 27% higher than the start of the pandemic.

But when adjusted for inflation, it was about a 20% correction, the biggest drop since the 1970s.

The biggest declines were picked in Auckland and Wellington.

Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.