House equity

Kiwi property prices rise to halt this year, Australia to follow in 2023

FILE PHOTO – Residential homes are seen in Wellington, New Zealand July 1, 2017. REUTERS/David Gray

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BENGALURU, Feb 25 (Reuters) – New Zealand’s property price boom will come to a halt this year and Australia will follow in 2023, as an expected rise in interest rates dampens two of the country’s least affordable property markets. world, according to Reuters poll predicts.

A multi-year property price boom based on near-zero interest rates has provided homeowners with record equity, but is making the dream of homeownership even more inaccessible for first-time buyers, especially those in low income.

While house prices recorded double-digit gains in both countries in the last year of the pandemic, they rose the most in New Zealand – by almost 30%. This real estate market is now the least affordable among OECD countries.

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But wages failing to keep pace with the cost of living, along with the added burden of three interest rate hikes since October from the Reserve Bank of New Zealand and others underway, are expected to dampen the market. Read more

The Feb. 9-24 Reuters poll of housing market analysts showed that average house prices in New Zealand had fallen by around 1.0% this year. They were then expected to climb 1.5% in 2023 and 2.7% in 2024.

“Prices can’t go up forever…pandemic-era stimulus has sent prices into the stratosphere and (now) we’re already seeing the housing market slow down quite rapidly in New Zealand,” said Jeremy Couchman, Senior Economist at Kiwibank.

“But affordability is still a major concern…prices are expected to come down a bit; nonetheless, it’s difficult to put together a down payment for first-time buyers. It’s going to be difficult for them, unfortunately.”

The average house price in New Zealand topped NZ$1 million for the first time. When asked to describe the level of house prices in New Zealand on a scale of 1 to 10, from extremely cheap to extremely expensive, the median response was 9. For Auckland, it was rated 10.

“We’re not talking about big declines in house prices for 2022, so I don’t expect it to become a buyer’s market,” said Mike Jones, senior economist at ASB Bank.

“But the balance of power should shift from sellers to buyers as additional supply rolls in and rising interest rates weigh heavily on housing demand.”

In Australia, where prices have almost doubled since the global financial crisis of 2007-2009, they are expected to rise another 6.7% this year, due to historically low interest rates.

But this breakneck pace of house price appreciation was set to end next year and drop 5%.

“The more than 20% gains in house prices over the past year will not be repeated in 2022 … in 2023 we see prices falling slightly as higher mortgage rates start to bite,” said writes Adelaide Timbrell, senior economist at ANZ.

Australia’s central bank will raise interest rates for the first time in a decade in the third quarter, slightly earlier than expected a month ago, another Reuters poll forecast showed.

(For other articles from Reuters Quarterly Housing Market Surveys: read more)

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Reporting by Vivek Mishra; Poll by Md. Manzer Hussain; Editing by Alex Richardson

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