New Zealand home price “madness” keeps affordable prices for years: Reuters poll

On June 24, 2017, you can see the new housing complex under construction in the suburbs of Auckland, New Zealand next to each other.Reuters / David Gray

August 19, 2021

By Vivek Mishra

Bangalore (Reuters) – New Zealand’s runaway housing market, which accelerated rapidly during the pandemic, will cool next year, but affordability will grow or worsen over the next few years, according to a study by real estate market analyst Reuters. ..

Home prices have nearly doubled over the past seven years thanks to ultra-low interest rates, dropping from 3.50% to 0.25% over that period, and rising to the point where prices are out of reach for first-time homebuyers and low-income earners. Left behind.

According to a poll of 10 Reuters real estate market analysts conducted August 11-19, after a 30% surge in the last 12 months, it is the highest among OECD countries, with home prices rising another 20% this year. It was predicted to rise.

The Reserve Bank of New Zealand (RBNZ) rate hike is expected to begin in the coming months, so the surge in home prices was expected to slow dramatically to 2.5% next year and 2023.

Sharon Zollner, Chief Economist at ANZ, said: “There are still very few properties available for sale, and the only real solution to this madness is to build more homes.

“But the scary thing is that this ratio will take six years, even assuming zero inflation in home prices from here to the end and income growth at a very solid pace of 5% per annum. That’s to get back to levels prior to COVID-19, “Zollner added. “If there is no complete fall in home prices, that’s the slogan.”

In polls, only two analysts predicted price declines, one of which said it wasn’t until 2023.

Quite a time

The measures introduced by the government and the RBNZ this year are still at record lows, but have not been able to cool the market so far.

“National affordability continues to deteriorate,” said Brad Olsen, chief economist at Infometrics. “To reduce the home price-to-income ratio from about 7 to the more affordable ratio of 3, we need to lower home prices by 56% or increase income by 130%, which means a significant improvement in affordability. This will take some time.”

Earlier this month, the Commission on Human Rights released a survey of New Zealand’s real estate market, stating that the housing crisis caused “penalties” for communities left out of society and left many homeless.

However, all poll respondents to the additional question said that central bank and government measures to lower real estate prices would have a significant impact, including those who said it was very important. rice field.

When asked what the biggest downside risk was, analysts said higher interest rates or stricter monetary policy.

Westpack Chief Economist Michael Gordon said:

“It’s likely to rob some of the steam coming out of the housing market,” Gordon added. “And coupled with tax changes, we’ll see a slight price drop in the middle of the decade.”

(Report by Vivek Mishra, Md. Vote by Manzer Hussain, edited by Ross Finley and David Holmes)

New Zealand home price “madness” keeps affordable prices for years: Reuters poll

Source link New Zealand home price “madness” keeps affordable prices for years: Reuters poll

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