The Reserve Bank (RBNZ) has again changed its view on house prices and now reckons we will see price rises in the current quarter.
And in forecasts prepared for its latest Monetary Policy Statement, the RBNZ said it believed house prices hit the trough - and stopped falling as of the June quarter.
This means the bank has revised up, quite markedly, its forecasts for the housing market in each of its last two Monetary Policy Statements.
Back in February the RBNZ had forecast a peak-to-trough decline in the market of 23%. Then in May it was 17%. Now it's just 15%.
The RBNZ now reckons that prices will grow 1.6% in the current quarter and the by March 2024 we will be seeing annual growth of 3.6%.
However, the RBNZ does not see this rate of growth accelerating, indeed after forecasting a 'peak' annual growth rate of 4.3% in June of next year the central bank sees the annual rate declining back to 2.6% by March 2025. However, it does see prices then rising a little bit more, with the highest level, 5.6%, set to be met in the last forecast month, which is September 2026.
Back in February the RBNZ said:
"House prices are projected to keep falling in 2023, consistent with very low sales volumes in recent months. House prices are assumed to have fallen by around 23% from their peak in 2021 to their trough in mid-2024, before recovering as interest rates decline toward their neutral setting."
But now in its latest MPS it says:
The constraining impact of high interest rates has been most visible in spending and economic activity related to housing over the past year. Higher interest rates have contributed to lower demand for housing, with house prices falling 15% from their peak in November 2021 to March 2023. Stronger net immigration, alongside a peak in interest rate expectations, has occurred at the same time as house prices have started to stabilise in recent months. While the outlook for house prices is highly uncertain, they are now assumed to have reached a trough earlier than was assumed in the May Statement.
The RBNZ said the stabilisation in house prices over the June 2023 quarter "was earlier than anticipated in the May Statement".
"The rapid return of net immigration, an increase in the number of residents due to the one-off 2021 resident visa, strong employment and nominal wage growth, slower increases in retail mortgage interest rates and a relatively low number of houses available for sale have contributed to this recent stabilisation in house prices," the RBNZ said.
"Consequently, we assume no further falls in house prices. We assume house prices grow gradually over the next year before increasing at a slightly faster pace in nominal terms over the remainder of the projection."
"Although house prices have stabilised, they are significantly below their previous peak. This lower level of house prices is expected to flow through to less household spending over the projection, as aggregate household wealth has fallen substantially."
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Notice they speak of nominal wage growth, not real wage growth. Unless real wage growth heads into positive territory, inflation heads quickly back down to 2% and credit rules relax again, there will be no or minimal chance of any house price growth coming from anyone outside the investor class.
My guess is they are predicting the Fed will crash the global system, then open the global flood gates to credit for the investor class. Also they predict National wins a coalition government, allowing that very same international investor class to flood NZ with all that cash to stash in a safe place during the impending recession/depression.
At current prices together with a new higher normal for interest rates, FHB's providing support at this point is financial cannon fodder. These are real people not pawns in a game to protect the greedy from the fallout of poor decisions.
Homes should be for living in and not speculating on.
It is amusing to see two articles on here, back to back on the same day, in which one says prices are still falling across most of the country on Trademe, and the next saying the RBNZ says house prices have stopped falling. This is a clear case of 'don't believe your lying eyes', so which set of eyes are lying?!
DGM showing signs of clinical anxiety this morning.......
They know that headlines like this can lead to FOMO and upward movement in house prices.
Anyway, the DGM can hardly complain....... for at least the last 18 months, house prices have been weakening, so they've had ample opportunity to buy on favourable terms.
All good things, however, eventually come to an end - and housing market corrections are no exception.
TTP
"Consequently, we assume no further falls in house prices. We assume house prices grow gradually over the next year before increasing at a slightly faster pace in nominal terms over the remainder of the projection."
I can't see any street parties from my webcam (overseas at present). Perhaps the msg hasn't cut through yet.
"Although house prices have stabilised, they are significantly below their previous peak. This lower level of house prices is expected to flow through to less household spending over the projection, as aggregate household wealth has fallen substantially."
OK. This seems like confirmation that the wealth effect is in reverse. But the prior comment says house prices have stopped falling. That possibly means that the pointy heads believe that there is no synergistic downward spiral between the wealth effect and house prices. But they don't say. Or don't know.
There has to be enough excess wealth AND credit availability for there to be growth, at present that is still in reverse gear, therefore this is a prediction of a significant back track on interest rates due to an impending crash. Are we seeing here a prediction of incoming hyperinflation?!
I'm picking house prices to flat line for the next couple of years. With inflation sticky it will be a fall in real terms. I don't foresee the projected rise in unemployment rate (4.5%) to have a negative effect in house prices. Those at the bottom of the employment ladder are less likely to be players in the housing market.
Depends on what happens at the election in October, if National get in then there will be more confidence in the market and I see the RBNZ prediction being about right. Been picking the bottom to be from August to October for a few weeks now. I think this summer will be the start of the recovery.
My 1.23 cents (inflation adjusted) is that house prices *might* find a floor in the 2500 to 3000 range on that graph. The fundamentals (interest rates and inflation) suggest that even that range will be difficult to maintain as that level correlates with mortgage rates of 3.5% compared to the current 6.5%.
This is simply a case of wait and see, as lots of highly leveraged people will not be able to sustain these interest rate levels indefinitely.
Not a word about potential economic troubles, a recession, bankruptcies or rising unemployment. Quite astounding in my view! Well, based upon the RBNZ's rosy forecast of a goldilocks economy, I would agree that house prices may rise again, BUT sadly, I don't see the economic future of NZ as positively as they do.
Bit like Bernanke in the US Yvil before all hell broke loss with the GFC (subprime issues are 'contained', no housing bubble etc)
Realised that there is no point listening to what central bankers have to say after watching that unfold.
They tell you what they would like to happen, not what could or is likely to happen.
Why stop at houses? Why don't we ban the importing of fridges? Limit supply, provide preferential lending to fridges purchases and bid the prices up. I'm certain it'll make us a Rockstar economy. One day I can tell my grandkids about how the old Kelvinator I bought for a dollar is now worth $150000, and that the new generation is just too lazy to ever get cold food storage of their own as I take half their food to be able to use my cooling facilities 🙃
Not so. Just wanting and orderly reset to a level that wage earning kiwis avoid being exploited by speculators. The key message yesterday was rates likely higher, and definitely for longer. According those hiding on five year fixed rates are more likely to get run down by rates hikes than they were a week ago.
Downwards always stickier than upwards. Patience with the popcorn...
If you flick thru the latest auction results here...
https://www.interest.co.nz/property/residential-auction-results
... you sèe why the spruikers are wetting themselves!
Properties RV'd at 960k are selling at 630k,
Properties over million bucks are not moving.
Most sales are at the lower end of the price range and selling at pre covid Cv hikes.
Hey Orr, the prices are falliing AND FAĹLING FAST.
I am firmly in the camp of wanting house prices to moderate another 5-10% over the next 6-12 months. However, citing a few anecdotes doesn't make my wish come true, and neither will it make yours Mofo Fomo. The REINZ monthly report is the best data we have and the last one supports the narrative that the market has plateaued or may have even had a small up tick. With inflation where it is property value is still declining, however the equilibrium of influences is shifting. Spring and an election may be enough to generate month on month momentum the "wrong way".
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