New Zealanders’ hopes for home prices have dropped to levels not seen since the Great Recession.
Compared to last year at this time, when 49% of respondents expected prices to rise, this year’s ASB home optimism poll found that 43% expected prices to decline.
At the height of the GFC, 55% of respondents in July 2008 predicted lower costs in the coming year.
ASB senior economist Kim Mundy predicts housing mood will decline even further, even though forecasts haven’t yet reached rock bottom.
“The housing market has been weak of late, and it doesn’t look like it’s going to turn around any time soon,” Mundy said in a news statement.
Given the Reserve Bank’s indication that further formal cash rate increases are forthcoming, it is not shocking that people’s price forecasts keep dropping in the housing market.
The official currency rate (OCR) was increased by the Reserve Bank of New Zealand (RBNZ) by 50 basis points on February 22. The RBNZ has increased the introductory interest rate in New Zealand by 450 basis points since October 2021, bringing it to 4.75 percent.
From its present 4.75 percent, ASB forecasts that the OCR will increase to 5.25 percent.
Many Kiwis also think further interest rate increases are in store for their nation.
Seventy-eight percent of respondents to an ASB poll published on Monday believe interest rates will continue to rise throughout the following year. Only nine percent were unsure of their opinion, which is lower than the norm of twenty-one percent.
According to the Real Estate Institute of New Zealand (REINZ), home values fell 12.2 percent in the year leading up to December 2022 as a direct result of aggressive increases in interest rates.
In Wellington, home values dropped by a whopping 19.7 percent in February compared to the same month in 2022, while the national average drop was roughly nine percent.
Since “house price falls have already been higher on a percentage basis than what we saw during the GFC,” Mundy predicts that “net price expectations” will fall to or even below their GFC bottom in the coming quarters.
According to ASB’s poll, South Islanders outside of Canterbury are the most negative about price changes over the next year, with 47% anticipating a decline. The next highest rate, 46%, was in the northernmost part of the North Island.
Perhaps, as Mundy put it, “we’re seeing the regions playing catch up.” Initially, house prices fell in major cities like Auckland and Wellington because of financial constraints; however, as interest rates have risen, price declines have extended throughout the regions.
The majority of respondents were pessimistic about the housing market. Only 2% said there were better times to purchase a home than now.
The only area where a net proportion of residents believe it is a favorable moment to purchase is Auckland, which stands at 2% (down from 9%).
In addition to loan rates, Mundy cites cost as a factor in determining whether or not now is a decent moment to purchase.
As interest rate increases are slowing down, the cost case may exceed the serviceability worries, suggesting that now is not a terrible moment to purchase.
The property market has yet to hit bottom.
