Sales activity down by 18.3% on a year ago, data shows
The current housing slump is unlikely to make a reversal until mid-2023, as ongoing inflation is tipped to continue to push fixed mortgage rates upward.
Read more: House prices in most regions still up on last year – REINZ
The Real Estate Institute’s (REINZ) house price index, which measures house price trends, dropped 5.8% in the year ended August, compared with the 2.9% decline in July, with most economists expecting further declines before price begin to recover.
Sales activity also fell 18.3% on a year ago, with 4,891 transactions, which Joel Glynn, Infometrics economist, said probably reflected sellers’ willingness to wait until they get their price, RNZ reported.
Glynn said sellers may have to wait a while, however, as a market turnaround was not expected until mid-2023 at earliest, depending on when the Reserve Bank was able to curb surging inflation, which is currently at an annual rate of 7.3%.
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The central bank was committed to lifting the OCR until inflation begins to return to its target range of between 1% and 3%, he said.
Fixed mortgage rates would likely be at around 5.9% by then and would likely remain at those levels for 18 months to two years, Glynn said. On that basis, he said house prices were predicted to pick up in 2024, but the recovery would likely be more gradual as the market would have added thousands more homes by then, RNZ reported.
“By about September or December 2024, we'll be back to making positive price gains sort of on an annual basis,” Glynn said. “And then we do have a bit of an expectation of a plateau out for the next three years after that.”
A Kiwibank report said house prices had to decline further in the near term, decreasing by 13% by the end of 2022, before they modestly recover.
“The run of play in the housing market continues largely in one direction,” it said.
Nathaniel Keall, ASB economist, said the housing market correction was proceeding at an orderly pace.
“There's no ‘smoking gun’ to say the market is on the turn with activity measures looking decidedly mixed,” Keall told RNZ.
