Main centre already shows signs of slowing down
Finance Minister Grant Robertson stated in the Budget 2021 announcement that the government forecasts a significant slowing in house price growth in the coming years, primarily due to its housing package – and the Christchurch market has already shown the first signs of slowing down.
In March, the government extended the bright-line test on residential property from five to 10 years as part of its new housing package and announced that it will spend billions to boost the housing supply. In last week’s Budget 2021 announcement, the Treasury stated it expects annual house price growth to peak at 17.3% in the June 2021 quarter, then ease to 0.9% by the June 2022 quarter.
Robertson stated that the forecast was a “very sharp adjustment in house prices, but a very necessary one.”
CoreLogic revealed that house prices in Christchurch have already started slowing down despite more neighbourhoods in the city reaching the $1 million mark. The city’s market was more affordable than other main centres – starting from a lower base, giving the city “more headroom” for faster growth than the national average.
CoreLogic chief property economist Kelvin Davidson said the 0.9% forecast was a sharper slowdown in price growth than expected.
“I think it’s likely that whatever the path for national average house price growth, that Christchurch would be above that just because it’s starting from a more affordable level,” Davidson said, as reported by Stuff.
Davidson claimed that the fund for additional housing supply was probably not enough, adding that the government might have instead expected the new housing package to boost housing supply.
Meanwhile, First Place Mortgages owner Jeremy Meachem said he does not expect house price growth to drop to “almost flat” until the government addresses the housing crisis.
“I could see maybe the increase reducing, but maybe getting down to say 5%. I’d be a little surprised if it got closer to zero,” Meachem said, as reported by Stuff.
However, he noted that Christchurch’s market was probably still considered cheaper than other markets in New Zealand.
“I do agree that [house price growth will] slow down, but whether the slow-down for Christchurch is in line with what the Treasury is predicting for the whole of the country ... maybe not so applicable to Christchurch,” Meachem added.
