PHOTO: House prices due for a well overdue correction. FILE
A major New Zealand bank is predicting house prices will fall in the second half of 2022 as supply meets demand, interest rates increase and credit conditions tighten.
In a report on Wednesday ASB said it’s forecasting house prices will experience a cumulative fall of four percent next year.
“We now expect small falls in house prices over the second half of 2022. Given the perils of house price forecasting, the cumulative forecast fall, of around four percent should be interpreted more as a hat-tip to the risk profile than a precise point forecast,” the report reads.
“It’s also tiny in the grand scheme of the 35-40 percent surge in house prices since March 2020.”
The report also noted homeowners are already preparing for higher interest rates after the Reserve Bank increased the official cash rate by 25 basis points to 0.75 percent last week.
It followed another 25 basis point increase in October. Banks quickly moved to increase interest rates as a result which will begin impacting borrowers over the coming months and could see house prices fall.
“The sharp adjustment we’ve seen in mortgage rates looks set to be a significant drag on house prices next year. This is the driving force behind our lower 2022 house price forecasts,” ASB said.
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