BNZ report sees 7% house price growth this year but warns of downside risks too

BNZ's economists are sticking with their view that overall houses prices will increase 7% this year.

"We continue to pick around a 7% lift in national house prices this year," BNZ chief economist Mike Jones says in his latest Property Pulse Report.

"It's a view that, in broad strokes, balances the positive impulse from falling mortgage rates and a recovering economy against the moderating influence of a more balanced supply-side picture," he says.

"Mortgage rates appear to have fallen to a level which is encouraging housing market activity.

"Basically, the numbers are starting to work for people again.

"Higher local authority rates, insurance and maintenance bills are clearly pushing in the other direction.

"But... the net change in cash flows over the past year for the average market participant, will still be strongly positive," he says.

However Jones remains wary of a couple of factors he says could still upset the property apple cart.

• The historically reliable correlation between house sales and prices may not hold up to the usual extent given the unusually strong supply response we've seen in this cycle. Put another way, an abundance of supply means the market is not as tight as looking at sales alone would suggest. Providing some support for this theory, the ratio of sales to listings is still at a level consistent with a mild oversupply.
• Large investment decisions are sensitive to confidence. Buying and selling activity could slow down again from here if rising trade and/or political anxiety causes folk to hunker down until the dust clears. The renewed slump in consumer confidence reported last week is perhaps an early sign of this effect."

"These factors underscore our view that the house price upswing is unlikely to be either strong or linear in nature," Jones says.

"Certainly, we're not anticipating anything like the froth and FOMO of the 2020/21 cycle."

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