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House prices are expected to give back about two thirds of their gains from the pandemic. (File photo)
The median house price is likely to fall 18% by the end of next year as the key two-year mortgage rate reverts to pre-pandemic levels, according to Jarden research analyst Grant Swanepoel.
He expects the median house price to drop to $740,000 by December 2023, from $905,000 in April, based on Real Estate Institute data.
The median house price has surged 49% over two years during the pandemic to peak at $965,000 in November last year as two-year mortgage rates fell sharply. With two-year mortgage rates now on the rise again, Swanepoel expects house prices to give up some of those gains.
“The November price point was eye watering for us and even caught us by surprise that it was still going up so sharply at that point,” he said. “Since then, house prices have been retracing month-on-month.”
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The median house price has slid 6% since the November peak and Swanepoel expects the decline to continue at about 1% per month before stabilising in December next year.
Still, houses will only give up about two thirds of their gains because homeowners are likely to resist selling at lower prices, he said.
“We’re not going to sell a house if we think that yesterday’s price is what we should be getting for it,” Swanepoel said. “They won’t fall as much as they rose.”
Swanepoel expects house prices to halt their decline by the end of next year and start growing again as the economic cycle turns.
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New Zealand’s national psyche is linked to house prices and we’re in for some pain, says Jarden research analyst Grant Swanepoel.
He said the drop in house prices is likely to affect the national psyche.
“New Zealand is very driven by house prices, more than most other countries, because all of our savings is locked up in it,” he said. “So therefore our mental economic health is actually very much tied to house prices.”
That’s likely to see measures like business confidence dip until optimism about the future outlook returns, he said.
“But I think we have to take some pain first,” he said.
New Zealand and other countries have got themselves into “quite a tricky position” by cutting borrowing costs to stimulate the economy during the pandemic, and central banks now had to put interest rates up, he said.
