The housing boom is now officially over, according to Westpac's economists.
Releasing the bank's latest Home Truths report, Westpac's acting chief economist Michael Gordon said, "There is now enough evidence to declare that the housing boom has ended, with prices turning downward in the last two months."
"We've long been saying that house prices can and would fall once we saw a meaningful rise in mortgage rates.
"That has now happened, with fixed term rates now factoring in the prospect of Official Cash Rate hike over the next couple of years."
Gordon said while a cooling of the housing market was expected, the timing was always uncertain.
"The economist Rudi Dornbusch had a saying to the effect of: changes in the economy take longer than you'd expect, then they happen faster than you'd believe," the Home Truths report said.
"That certainly seems to have been the case with the New Zealand housing market.
"We've been predicting for some time that once mortgage rates rise from their lows, the housing boom would cool off and tip over into modest price declines.
"However, the timing of that price drop has always been fluid.
"At one point we expected it to begin in the early part of this year, later pushing that out until the middle of the year when it seemed that the market still had quite some momentum behind it.
"But now we have enough evidence to show that the turnaround began in late 2021.
"The Real Estate Institute of New Zealand House Price Index fell by 0.9% in January, the second straight month of decline.
"As in December, the Auckland region led the drop in prices, but now the rest of the country has joined in as well.
"Prices are still up 20% on a year ago, reflecting the rapid price gains through much of 2021, but that measure is now coming down fast.
"House sales have been steadily declining over much of the past year.
"But while that previously could have been described as a moderation in the Covid-era boom, we're now beyond that point and sales are running below their pre-pandemic levels," the report said.
You can read the full Home Truths report here.
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