PHOTO: Sir John Key. FILE
A housing expert is criticizing Sir John Key‘s assertion that property prices could double in the next decade. The former Prime Minister made this statement earlier in the week on AM, attributing it to factors such as migration, increasing costs, and higher salaries.
However, CoreLogic’s chief property economist, Kelvin Davidson, disagrees with Sir John’s prediction. Davidson believes that the former Prime Minister’s stance is overly optimistic, especially considering the current weakness in the market due to high mortgage rates.
Davidson attributes the market’s fragility to factors such as migration, rising costs, and higher salaries. He acknowledges that while mortgage rates may decrease over time, they remain relatively high at present, contributing to stretched affordability in the housing market.
Contrary to Sir John’s prediction, Davidson argues that lending restrictions are likely to persist due to the prevailing high-interest rates. He finds Sir John’s views difficult to support, emphasizing that a significant factor in previous instances of house price doubling was a prolonged downward trend in interest rates, which is not anticipated in the near future.
Davidson suggests that while mortgage rates may eventually decrease, this is unlikely to occur in the immediate future. He speculates that house prices may see some acceleration in the second half of next year or even earlier, depending on the trajectory of mortgage rates, but cautions against expecting a significant surge in prices.
In summary, Davidson expresses skepticism regarding Sir John’s optimistic outlook on property prices, highlighting the current market challenges and the absence of favorable conditions for substantial price increases in the near term.