Is it likely to become a reality?
The Reserve Bank has predicted a 5% fall in house prices in one year, which would mark the first time prices have fallen since the Global Financial Crisis - however, experts say this is much more of a “vague indication” than a solid forecast, and even if it eventuates, a 5% fall would not impact the significant gains already made by owner-occupiers.
CoreLogic chief property economist Kelvin Davidson said that the prediction may just be a ‘risk mitigation measure,’ aimed at discouraging buyers from overpaying on properties that may see a fall in value later down the line.
“In terms of house prices, the government has forecast a bit of a dip in prices starting from next year, and running into 2023,” Davidson said.
Read more: RBNZ in fiery exchange over house prices
“We’re only talking around 5%, and even that is a little vague, more of an estimate or indication than a central forecast. You wonder if it’s yet another risk mitigation measure, with the Reserve Bank saying that there’s a risk of prices falling later, so you shouldn’t overpay now.”
“I do wonder if there’s some signalling going on there, but we’ll have to wait and see,” Davidson said.
“And in the end, 5% is probably not massive - if you take 5% off the purchase price for a first home buyer, then that’s great, but it probably wouldn’t make much difference to an owner-occupier, looking at the gains that they’ve already made over the last year on top of any previous years.”
Commenting on the high prices and the difficulty of getting on to the property ladder for first home buyers, Davidson said the issue is still a ‘massive’ one - and relying on the previous generation’s wealth is not always a guarantee either.
“For me, this issue is absolutely massive in New Zealand,” Davidson said.
Read more: Study reveals ‘Generation Rent’ views on property ownership
“You do think about what the position of your kids will be in the future, what housing affordability will be like and what access to the housing market will be like.”
“I think it’s all very well for the older generation to think ‘great, we’re in houses’ and everyone says that this wealth can always be passed on, but it’s really not that easy,” he added.
“You might have paid off your mortgage, but you don’t suddenly have $200k sitting around in cash either. So just casually saying that the parents can always pay the deposit - it’s not that simple, and it may well result in them going into more debt. So, I do think that there is a generational issue here, and it’s a bit too casual to just assume that that wealth can easily be recycled.”
