REINZ's latest data suggest the market is still decelerating, economists say
House prices are expected to plunge by 25% – a drop that would be nearer 40% when adjusted for inflation, according to ASB.
This is an even bigger forecast drop than that of ANZ, which predicted prices to fall 32% in real terms.
ASB economists said that based on REINZ’s latest data, the market appeared to still be decelerating, Stuff reported.
“The REINZ house price indices have eased for a 12th consecutive month on the trot as of November,” the economists said. “What’s more, last month’s 1.9% month-on-month fall was the largest monthly fall in house prices since December 2000. Rather than getting closer to a floor, the present housing market downturn may be increasing in pace, though we should be careful about extrapolating from monthly swing.”
House prices were down 14% from their November 2021 peak, they noted.
About half of the capital gains posted since March 2020 had been eroded.
“In terms of the regional split, monthly price declines in many parts of regional New Zealand are now matching those seen in Auckland and Wellington,” the ASB economists said. “Northland, Gisborne, Hawke’s Bay, and Taranaki all saw monthly falls of 2% to 4% in November – all above or in line with the 1.5% and 2.2% dips seen in Wellington and Auckland respectively (again, all numbers seasonally adjusted).
“Of course, given the downturn started earlier and has previously proceeded more sharply in Auckland and Wellington, the cumulative fall in prices in the main centres is still much larger than in the regions: 19% to 20% versus a figure in the single digits for most of the rest of the country. Still, it’s a sign that many of the factors putting the market under pressure are now national in scope – higher mortgage rates being the obvious one – and some of the regions that have escaped the brunt of the downturn thus far are feeling the pinch.”
Sales activity dropped 12% month-on-month when seasonally adjusted and had reached levels not seen since the global financial crisis, excluding the 2020 lockdown, they said.
“This is not a market on a brink of a comeback,” the economists said. “Broader economic dynamics suggest we are in for a prolonged period where the housing market is relatively soft.”
Housing shortage had dissipated, they said, due to the strong levels of construction over the past two years, and population growth was predicted to be soft over the immediate period.
And it might not be until mid-2024 that the OCR will start to ease.
“Our outlook sees prices erase a chunk – but not all – of their post-COVID gains,” the ASB economists told Stuff. “Again, given the high levels of inflation we’ve experienced over the last 12 months (and the likelihood inflation remains somewhat elevated in the near term), that number is likely to remain considerably larger in real terms. The inflation-adjusted decline in house prices is likely to be nearer 40%.”
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