Price inflation could turn higher if the outbreak got under control
ASB economists have predicted that house prices would plummet for the next six months as the COVID-19 (coronavirus) outbreak continues to affect the housing market.
The economists previously predicted that house prices would increase by 8.6% in June. However, ASB senior economist Mike Jones said the economy seems to be heading for a recession despite low interest rates and official cash rate (OCR) cut.
“The economic fallout from the coronavirus outbreak will have implications for NZ’s property market. Both demand and supply are likely to take a knock. Demand is likely to tail off first and listings to follow as sellers pull back and await better conditions,” Jones said, as reported by Good Returns. “The March quarter looks to have been a belter for house price inflation, but we now forecast small outright declines in house prices for the June and September quarters.”
Read more: Coronavirus could slow down house price growth – economist
On the bright side, the economists believe that price inflation could turn higher “from around Q4” if the outbreak got under control and activity in the market would recover.
“However, given we’re in the eye of the storm, longer-term forecasts should be taken with a grain of salt,” Jones said.
He added that low interest rates are expected to have a “cushioning effect” on the market and would be the “starting point of strong excess demand.”
