BNZ economists are now expecting house prices to rise just 2% in this calendar year after earlier forecasting a 5% gain.
And they say even the new, lower, 2% forecast has "downside" risk.
In his latest Property Pulse publication, BNZ chief economist Mike Jones says last year’s "short string" of monthly house price gains "now look like a false start".
"And we think current scratchy momentum will stick around for longer amid high mortgage rates, a deteriorating economic and labour market backdrop, and a jump in unsold inventory," Jones said.
He still expects a more obvious upswing next year and is forecasting that house prices will rise 7% in calendar year 2025.
Jones said the latest Real Estate Institute of NZ (REINZ) housing data had showed the House Price index (HPI) recording "essentially no growth" from January to April (adjusted for seasonality).
"That leaves house prices holding about 3% above the February 2023 cycle low."
He noted the elevated level of activity among first home buyers (FHBs), but investors, by contrast, "are less interested".
"New investor lending diverged noticeably from that of FHB in 2022 and has tracked down to about 16% of total. In absolute terms, it has yet to substantively recover from the lows struck around the start of 2023.
"Any positive impact on investor demand from the new government’s change in investor tax policies, so far, seems to be being offset by the cash flow hit from high interest rates and soaring insurance, rates, and maintenance bills.
"The anecdote points to investors remaining on the sidelines in the short-term. It’s possible we see a lift in investor selling intentions once the Brightline Test shifts back to two years in July, but we’d expect this impact to be small."
Weighing up all the various pros and cons, Jones says house price fundamentals "are overall less supportive than at the time of our last update".
"Economic and labour market conditions have deteriorated, mortgage rates are set to stay higher for longer, and the jump in unsold inventory will take time to work off.
"We’ve shaved back our 2024 house price inflation expectations as a consequence.
"Further ahead, we remain of the view the current period of house price stasis will eventually give way to a clearer upswing in prices.
"Most important in this regard is our view that mortgage rates will start trending lower next year. More demand-friendly housing policies and a recovering economy will add support.
"Acting in the other direction, affordability and cash flow constraints will cap the magnitude of the upturn."
83 Comments
House prices seem destined to continue falling for the rest of the year - at least to me.
Some key economic determinants have changed over the last few months - so the banks (and other forecasters) have to review their outlooks.
I think the BNZ is still a bit optimistic. Market sentiment is low and won't be helped by the yesterday's OCR result - though I firmly believe RBNZ made the right decision.
TTP
Tothepoint's now admitting his recent misguided sentiment/predictions for house prices has become the subject of comic entertainment. Good to see he's finally reading the correct memo...
Next cab - Zwifter?
FHB's were wise to wait all along, there is/always was no hurry to buy and most importantly, August to October 2023 being the last viable opportunity to enter the market predictably turned out to be a complete CROCK.
Obviously 10% Tony has run out of cannon fodder, that prediction miss will be hilarious come the end of the year.
Always surprising when you speak to 'property investors' that say they get their 'information' from his phantom surveys.. really goes a long way to explaining why the nz housing markets in the state its in.
Very true Speedy. NZ down circa -30%
But worst still .....Auckland down -40% and WellyTank down -48% in REAL terms since 2021. Wow....biggest bust in NZ housing history- and it's no where near done yet!
As we all, know if housing is not at least appreciating at the rate of inflation - IT IS GOING BACKWARDS IN VALUE......
It's the worst inflation hedge asset class, in a high inflation world!
Lets look at the facts. I purchased late 2020 for $850K the house is currently valued at $980K and I have saved over $100K in dead rent money over that period so I am UP about $250K in only 3 years. As long as you purchased a house outside of the RBNZ induced Covid madness period you are laughing, but that's why we all come here right ? for decent financial advice and not to listen to the clowns.
Fair enough. I won't tell you my housing gains......or just dumb good luck, as it would be, as it would make you Very Jealous.|
I really don't mind giving up 500k....if NZ is a fairer and more equal place, giving young families the Kiwi dream of owning their own home, without selling their souls and first born to the REA industry gouls.
Nevertheless, we are headed back to the valuations of the period 2015 to 2018. This is the best advice on this site, period.
I just hope the soggy leaking dam holds there??....otherwise we are in major financial trouble and serious uncharted rocky and mine riddled waters!
I think you'll be spot on provided no 'big shock' to current settlings.
But, don't forget the record withdrawls we are seeing from Chinese bank accounts. Overseas RE is still seen as a safe haven, I suspect. Not sure how easy it is to get capital out these days.
But all Luxon needs to do is get rid of the ban and we could have RE tourism back on by the plane loads!
And, I can very much see Luxon and co. making this move. I think Seymour pitched it in their coalition discussions, but I can't recall whether it was mentioned in the agreement - given at that time, National were talking about their foreign-buyer tax.
He still expects a more obvious upswing next year and is forecasting that house prices will rise 7% in calendar year 2025.
Sure. And these numbers won't be that difficult to forecast when it's fed in to a model. I don't know what the formula is but it includes: volume demand (that means demand for debt); volume supply (mortgages - more or less unlimited because it comes from thin air); market supply (some airy fairy approx of a representative price for the marginal buyer).
Wouldn't it be great if they were required by law to show their workings to the public. Obvious response is that it's none of the business of the general public how they forecast. What they fail to recognize though is that they have an exalted place in society where they're able to create money of thin air. Would be good if more people understood the privilege they have.
"Gareth Kiernan, chief forecaster at Infometrics, said he expected house prices to be at 2023 levels in mid-2026.
"Our forecast horizon is mid-2029 and we still think house prices will be below the 2021 peak at that point"
https://www.rnz.co.nz/news/national/517687/house-prices-won-t-return-to…
"Our forecast horizon is mid-2029 and we still think house prices will be below the 2021 peak at that point"
If that forecast proves to be correct, then the buyers of 2020 - 2022 period would have been better off renting and saving the difference. They would have a vastly smaller mortgage if they had waited.
"Most important in this regard is our view that mortgage rates will start trending lower next year. More demand-friendly housing policies and a recovering economy will add support.
Look how long it's taking for higher mortgage rates to have an effect. If he thinks as soon as rates start to drop it'll have an immediate effect the other way, well I'm not so sure.
Also, does anyone put any credence in the yield curves reverting to normal and the historical aftermath as far as recessions go? Seems we've got a lot of water to go under the bridge before anyone starts talking about a recovery (and acting like our current economic situation is going to be the low point).
I think a 2-5%pa downward glide for the next couple of years is probably a best case middle-ground scenario for NZ overall.
Buyers can bide their time and build up deposits, sellers can learn to deal with the fact it was a rollercoaster and not a rocket ride, and those not doing either can come to terms with the new "normal" level of mortgage payments. Incomes will rise to meet the increased outgoings*, even if it doesn't return things to the "good old days", but everyone will have learned that just because you can (borrow it) doesn't mean you should.
* Yes, I'm ignoring imminent redundancies, yes I know that's a big thing to ignore.
The “new normal level of mortgage payments” - agree! The new normal won’t be much different to the old normal (ie pre GFC, since 2008 to 2022 was completely abnormal), ie around 6%. https://teara.govt.nz/en/graph/23100/interest-rates-1966-2008
There seems to be a pervasive underestimate of what normal rates look like as most don’t realise that central banks applied emergency rates in 2008 to rescue the global financial system, and before they were normalised Covid came and they bent over even further. Many have forgotten or didn’t experience pre 2008 normal and have been fooled into thinking that we will return to typical 2009-2019 rates (or even 2020-21 rates). Won’t happen. I think it will be a fair while before we see <5% mortgages
That is so, so true.
Pre-pandemic models are being reworked everywhere as they are not giving sensible predictions - as has been born out when the RBNZ was predicting decades of low rates during the pandemic. (And seemed paranoid about deflation before that which was ludicris.)
Auckland is still crashing. Would be good to see his breakdown by region/city. I wouldn't be surprised if the 2% gains are being held up by the regions not following as quickly. I can't see any trends that would indicate Auckland will not fall further at this stage.
COMPLETE AND UTTER BANSTERS BOLLICKS!
This NZ Housing Market has another -20% to fall minimum! It's Guaranteed by RBNZ itself!
This once in a generation crashing housing market will be written of in the history books, alongside the epic South Seas and Dutch Tulip Bubbles.....
Seems like Tony Alexander has finally cottoned on to reality ...
https://www.oneroof.co.nz/news/tony-alexander-in-the-most-dangerous-par…
From the article:
Cash flow pressures will be felt across most sectors of the economy but particularly hospitality, retailing, and the widely defined home building sector with concentration on developers of multi-unit buildings. Many businesses will not survive to 2025 and when I get to this point in my presentations, I strongly emphasise this following point.
The decline of sufficient cash flows for many businesses will initially be accepted as temporary. But as the owner trims costs, perhaps sells off assets to shore things up, there comes a point where it will be clear that continuation of the business is not possible.
The problem is that the owner is probably not going to acknowledge this situation until it is too late to save some capital, their home, their marriage and maybe their health. My recommendation thus becomes this:
For those of us who have been around for a while and seen the ups and downs, watched the rash purchases of golden Ford Rangers and seen the forcing of families to live with relatives, there is a duty. One of us needs to sidle up to our relative, friend, club mate running the business and say perhaps you need to call it quits. Not everyone wins every time and sometimes you’ve got to stop what you’re doing before things get legal at the behest of your bank, your creditors, or the IRD.
'He still expects a more obvious upswing next year and is forecasting that house prices will rise 7% in calendar year 2025.'
Thay are not allowed to utter such heresy.......these economc prests and soothsayers must maintain the bank/company line and in turn cajolle the stretched market to further line the "fat to spill" pockets of the banking industry.
One major problem, the general market now know, the veneer has lifted and the overbaked and still helleshly overpriced NZ HOUSING market is a balloon that is midpop.
Deflating bigtime cuŕrently...... buyers today will be the underwater, negative equity bag holders of tomorrow.
BE CAREFULL OUT THERE!!!
Inflation is not over. Here is what's happening to regional Hawkes bay rates:
Over the last 10 years rates have quadrupled 2014-2024.
The council is proposing a rejig of the rates and a new rating valuation system for 2025, which happens to be exactly a 100% increase from this year.
For example, this is what it looks like in round numbers:
Rates 2014 - $1,000
Rates 2024 - $4,000
Rates 2025 - $8,000
Yet another reason why prices will trend downwards… less money available to service borrowing.
When everyone's saying the sky is falling, it's probably time to buy property. Picking the absolute bottom is almost impossible, but the last year has been as good a time as any to dip your toes in the water.
Nathan Rothschild allegedly said, "buy on the cannons, sell on the trumpets".
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