New Zealand home prices fall by record 10.5% as interest rates soar
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Values fell for a 12th consecutive month, with the average house price declining to $782,000.
PHOTO: BLOOMBERG
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WELLINGTON - New Zealand posted a record fall in house prices in the year through March as soaring interest rates and slowing economic growth pushed buyers to the sidelines.
Prices fell 10.5 per cent from a year earlier, the largest annual drop since the series began in 2003, CoreLogic New Zealand said on Wednesday.
Values fell for a 12th consecutive month, sliding 1.1 per cent from February, with the average house price declining to NZ$933,770 (S$782,000).
The Reserve Bank of New Zealand (RBNZ) unexpectedly raised interest rates to a more than 14-year high on Wednesday, reiterating that inflation was still too high and persistent.
The RBNZ increased the official cash rate to 5.25 per cent from 4.75 per cent, wrong-footing most economists who expected a 25-point hike.
The central bank said in late February that it expected to raise the official cash rate (OCR) to 5.5 per cent in 2023 to get inflation under control.
While bank lending rates have largely priced in the full extent of the RBNZ’s intended tightening, many home owners have yet to see their fixed term mortgages roll onto a higher cost of borrowing.
“Interest rates for new borrowers and existing borrowers who are repricing remain elevated and this is requiring some careful budgeting,” said Mr Kelvin Davidson, chief property economist at CoreLogic. “Mortgage availability also remains restricted, and neither buyers nor sellers are in much rush. These factors make is easy to see why property values are continuing to drop.”
The central bank predicts property prices will fall 23 per cent from their late-2021 peak by early 2024.
In capital city Wellington, prices have already fallen 20 per cent from a year earlier, today’s CoreLogic data shows. In largest city Auckland, prices are down 13.1 per cent in the year.
Mr Davidson said some signs are emerging that the market slump may run its course over the next few quarters.
“The first marker for this downturn coming towards its conclusion – a mortgage rate peak – now seems to have been reached,” he said. “There’s a case building for property sales activity to creep higher later in 2023 and for prices to stop falling.” BLOOMBERG
