Economists warn of potentially significant regional variation
Economists' predictions on the housing market post lockdown have become less severe than previous forecasts, but potentially significant regional variation looms in the coming months.
Mike Jones, an economist at ASB, predicts a 6% decline in national house prices as the housing market post lockdown has already seen significant regional variation. House prices in Otago had seen a 4% decline since February, while Auckland prices dropped by 0.5% over the same period due to fewer people migrating to the city.
Meanwhile, ANZ economists now predict a 5% to 10% drop in house prices rather than their previous 10% to 15% forecast.
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Sharon Zollner, the chief economist at ANZ, said they expect house prices to fall by 5% to 10% a little later – with the force of the impact expected to show at the end of the year and into 2021.
“This is a smaller fall than we previously feared, with a less aggressive subsequent rebound,” Zollner wrote on ANZ's Property Focus, as reported by Interest.co.nz.
“We aren't ruling out a larger fall; there are clearly significant downside risks. But we are now more comfortable that stimulus is providing support, and a bigger drop may be avoidable.”
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The ANZ economists believe that the housing market has dramatically changed amid the COVID-10 crisis, which will weigh on house prices.
“We now assume more of an offsetting impact from policy supports. Temporary boosts to cash flow like the wage subsidy and mortgage deferment schemes will end, but house prices tend to be quite persistent, so this boost will linger,” the economists wrote on the report.
“Meanwhile, low (and potentially even lower) interest rates will be with us for a while yet, especially given our expectation that QE [Quantitative Easing - money printing] will increase to $90 billion at the August [Reserve Bank Monetary Policy Statement].”
