Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

New Zealand house prices to sink 9.0% this year, another 2% in 2023: Reuters poll

Economy May 26, 2022 05:10PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: A newly built housing estate can be seen next to another under construction in a suburb of Auckland in New Zealand, June 24, 2017. REUTERS/David Gray

By Vivek Mishra

BENGALURU (Reuters) - New Zealand's house prices are forecast to sink 9.0% this year as aggressive interest rate hikes take some heat out of the blazing housing market amid a worsening cost of living crisis, keeping potential buyers on the sidelines, a Reuters poll found.

House prices have nearly doubled in the last seven years as investors have cashed in on near-zero interest rates and access to cheap loans. That has led to increased homelessness and fuelled inequality, making New Zealand's the most unaffordable housing market among developed nations.

Although house prices have already started to come off their highs, they are still very far from returning to their pre-pandemic levels.

The 9% decline predicted for this year in the latest Reuters poll of 11 property market analysts taken May 11-26 is much larger than the 0.8% fall predicted in a February poll.

House prices are forecast to decline a further 2.0% in 2023.

"The cost of housing in New Zealand is a national embarrassment. The reasons are deep-seated. Ultimately it comes down to the fact that new housing supply just hasn't been responsive enough to periods of rising housing demand," said Jeremy Couchman, senior economist at Kiwibank.

Couchman forecasts house prices will fall a little more than 10% this year in what he calls a "short and sharp" correction.

While such an expected fall was a long time coming, the drop may be too small to offer much reprieve for first home buyers after prices soared over 250%, almost four times the average increase across OECD countries.

The Reserve Bank of New Zealand, which considers house prices as one factor in its policy deliberations, has already hiked interest rates by a total of 175 basis points since October last year and signalled on Wednesday a lot more tightening was to come.

It expects home prices to drop by around 20% or more before they reach sustainable levels.

ANZ, Macquarie Bank, Infometrics and Real Estate Institute of New Zealand (REINZ) said average house prices would have to fall between 30-50% - roughly the amount they fell after the oil shock of 1973 - to make housing affordable.

While lower house prices would help the government's affordability objectives, it would be a bitter pill to swallow for very recent homebuyers, watching their capital decline and facing higher repayments as interest rates rise.

"Increasing interest rates will hinder the ability to service mortgages...lending restrictions, including minimum deposit, will hurt first-time homebuyers who don't have support from the bank of mum and dad to raise the initial deposit," said Ankur Dakwale, research analyst at Bayleys Realty Group.

When asked to describe the level of New Zealand house prices on a scale of 1 to 10, from extremely cheap to extremely expensive, the median response was 9. For Auckland, it was 10.

Still, not everyone expected prices to fall this year. REINZ and Infometrics forecast house prices to rise 5.0% and 4.1% this year, respectively.

"Sentiment from buyers has changed from a fear of missing out to a fear of overpaying and this all has a suppressing effect on house price increases," said David Shaw, property market analyst at REINZ.

"(But) even a drastic slowdown in house price increases from the past year will still leave moderate increases in place."

(For other stories from the Reuters quarterly housing market polls:)

New Zealand house prices to sink 9.0% this year, another 2% in 2023: Reuters poll

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email