Jul 3, 2024
New Zealand House Prices Extend Decline as Borrowing Costs Bite
, Bloomberg News
(Bloomberg) -- New Zealand house prices fell for a third straight month in June, pressured by high interest rates that are forcing buyers to the sidelines.
Values dropped 0.5% from May, CoreLogic New Zealand said Thursday in Wellington. Prices declined 0.8% in the three months ended June 30 — the first quarterly decline since September last year.
The reversal in momentum comes as the central bank persists with restrictive monetary policy, which is denting consumer confidence and lifting unemployment. While home-loan interest rates look to have peaked, the Reserve Bank has signaled it isn’t ready to lower the Official Cash Rate anytime soon, adding to signs that mortgages will remain expensive for the foreseeable future.
“”The last twelve months could be described as a dead cat bounce with confidence perhaps misjudging the trajectory for mortgage interest rates,” said Nick Goodall, Head of Research at CoreLogic. “Mortgage holders should prepare for similar levels of interest rates for the rest of the year, and homeowners for the market upturn to underwhelm, especially with job security now declining.”
In May, the RBNZ projected the OCR would stay at 5.5% until the third quarter of 2025, although economists argue a cut should come earlier as economic growth remains lackluster.
The average two-year mortgage rate was 6.75% in May, according to RBNZ data based on loans with a substantial deposit. That’s down from a peak of 7.01% in November but is higher than the 6.49% recorded a year earlier.
Prices rose 1.8% from a year earlier, accelerating from a 1% pace in May and the fourth month of annual gains. CoreLogic constructs its index on a rolling three-month basis using prices once settlement is agreed. That means its series lags other housing indicators that have shown prices starting to rise on an annual basis since late 2023.
The average house price fell to NZ$927,284 ($564,000), according to CoreLogic data. Prices fell from a month earlier in four of the nation’s six biggest urban areas — including largest city Auckland, where they declined 1.2% — and were unchanged in the other two.
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