By Lucy Craymer
WELLINGTON (Reuters) -The New Zealand housing market may no longer be a one-way bet, the chief economist of the country's central bank said, warning that changing dynamics in the sector would act as a handbrake on hefty returns.
"For several decades, we have traded houses among ourselves at ever-increasing prices in the belief that we were creating prosperity," Reserve Bank of New Zealand Chief Economist Paul Conway said in a speech released on Thursday.
"But the tide may well have turned against housing being a one-way bet for a generation of Kiwis," he added.
Conway said slower overall population growth and changes in taxation make it less attractive to invest in housing while policy designed to enable higher housing density are all altering the property market dynamics.
"Given the importance of housing in our economy and national psyche, this will be a huge change," he said.
House prices in New Zealand jumped more than 40% in the two years to December 2021. However, a combination of tighter credit, more housing and rising mortgage rates have started to weigh on prices.
Conway said even though the market has recently turned, with house prices down over the first half of 2022, property values remain at very high levels in absolute terms and relative to incomes.
The central bank forecasts a 15% decline in house prices from their peak in late 2021.