PHOTO: New Zealand house prices are expected to fall. FILE
House price inflation in New Zealand will ease substantially next year, followed by outright price falls in 2023, but affordability is set to worsen in one of the world’s most expensive property markets, a Reuters poll found.
Historic amounts of stimulus to mitigate the pandemic-induced economic recession have helped New Zealand’s economy recover strongly, but have lit a fire under house prices.
They are expected to rise 25 percent this year, having already doubled in the last seven, making New Zealand’s property market one of the least affordable in the world.
That has increased public scrutiny of the Reserve Bank of New Zealand, whose ultra-easy monetary policy has been blamed for the current property market boom.
Even measures introduced by the government have so far failed to cool the market, leaving new homeowners with ever-larger amounts of debt.
“House price rises remain insanely high, with housing market pressures still going berserk. The goal posts are moving further and further away from many potential homeowners,” said Brad Olsen, senior economist at Infometrics in Wellington.
Home price increases were forecast to slow dramatically to 4.0 percent in 2022, a Reuters poll of 10 property market analysts taken Nov. 18-25 showed.
But further tightening from the RBNZ next year is expected to end the house price boom, leading to a 2.5 percent fall in 2023, according to the poll.
“FOMO (fear of missing out) is a common characterisation at the moment of the housing market’s ‘animal spirits’,” said Sharon Zollner, chief economist at ANZ.
“Looking through the noise, we are convinced we are now past the peak of the current inflation cycle, but the pace of moderation from here remains very uncertain.”
The housing crisis and the economic impact of COVID-19 have led to increased homelessness and fuelled inequality.
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