This after REINZ reported a 1.5% fall in its house price index month-on-month
ASB’s economists have upped their forecast for house price falls, now expecting the drop in prices, from peak to trough, to hit 15%, instead of their previous forecast of 12%.
That is a fall of 24% when adjusted for inflation.
Read more: New Zealand is halfway through the biggest house price falls in decades – ASB
The Real Estate Institute reported a 1.5% fall in the house price index month-on-month in September, which ASB economists said was the latest in a “remarkably uniform” series of falls since the peak in late 2021, Stuff reported.
“Prices have fallen around 1% to 1.5% almost every month for the past nine months,” the ASB economists said. “Those gradual falls contrast dramatically with the speed and magnitude of the previous boom – indeed prices are still up nearly 30% on where they were at the beginning of 2020.”
They said the main activity measures so far don’t signal a change in the housing market, nor do they expect a trough until the first half of 2023, when the cycle would begin again.
“Last month’s tentative lift in sales activity proved short lived, with September volumes falling 7.2% month-on-month on a seasonally adjusted basis,” the economists said. “Excluding 2020’s lockdown, that takes sales to their lowest level since 2010.”
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Their previous forecast of a 12% decline, or 20% when adjusted for inflation, was the biggest fall since the 1970s, in real terms.
The economists said, however, that even a 15% dip was “relatively orderly” and would leave prices higher than they were at the start of 2020, Stuff reported.
“We’d add the caveat though that prices have already fallen more sharply than some of the typical indicators of housing market activity and tightness would suggest, so we need to be mindful of the uncertainty to come. Broader structural factors underpinning the market don’t show much sign of a rapid turnaround either,” they said. “We continue to expect low levels of net migration over the coming years, with the housing shortage much less acute than it once was. We also expect the recent easing in credit conditions to prove short-lived, with mortgage rates set to head higher once again and higher bank stress-testing thresholds unlikely to help.”
