Westpac says the housing market could be heading into a period of falling prices

Westpac says the housing market could be heading into a period of falling prices

The housing market could be heading into a period of falling prices, according to Westpac.

In its latest analysis of the housing market, Westpac chief economist Dominick Stephens said New Zealand's housing market had been going through a modest recovery phase, but he expected this to be short lived.

Stephens said the housing market slowed last year after the Reserve Bank introduced mortgage lending restrictions and fixed term interest rates started rising.

Earlier this year Westpac began predicting a modest housing upturn, as a surge in net migration boosted population growth, fixed mortgage rates fell between February and June and there was an increased willingness by banks to lend to people borrowing more than 80% of a property's value.

However the market continued to send out mixed signals, making it difficult to pick which direction it was headed in.

"Housing data that could either confirm or refute the mid-year bounce was frustratingly absent for some time - the data was hopelessly mixed," Stephens said.

But June's figures lent support to the argument that a market revival was underway, although probably only a modest one.

Stephens pointed to Quotable Value's Residential Price Movement Index which showed that prices rose quite rapidly in the June quarter of this year after taking a breather in the first quarter.

And the REINZ's measure of house price inflation rose 3.3% in June, while property website realestate.co.nz reported a decline in the number of homes offered for sale.

Stephens acknowledged that some indicators were heading in the opposite direction, such as the decline in the REINZ's House Price Index in June, but believed the overall trends pointed to a revival.

But one that may not last.

"In our view, this market revival will be short lived," he said.

"Fixed mortgage rates have risen sharply over the past few weeks and we think that both floating and fixed rates will rise further over the next year.

"As interest rates rise, renewed downward pressure will come onto the housing market.

"We would not be surprised to see a period of declining house prices during the middle part of this decade," he said.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

13 Comments

Comment Filter

Highlight new comments in the last hr(s).

One means  "CRASH"

Similar comment from same bank was posted in 2009-10.  May be some stuffs just get regurgitated now and then

Are they refering to NZ houses prices in general of just Auckland / Christchurch.  The two have been very different markets over the last 5 years or so.

Sure a decline, sounds like the same mantra talked about all those years back, a drop of 30% turned into a gain of 30%, how can a professional finance spokesman get it so wrong? Look at the stats, 40,000 + migrants, no housing stock, Labour circus promise CGT (another rush to buy before that wealth grab comes into play)... the list goes on - If you can hold on, it's a good time to buy property.

what is this 3.3% rise in june from the REINZ?  The linked article says no such thing, rather it says prices declined 0.6%
 
"The Real Estate Institute of NZ said the national median selling price was $427,250 in June, down 0.6% on May but still up 8.4% on June last year."

Dive dive dive!!  $2M properties selling for $500k.

Well, from an equally bubbular market, good old Dr Housing Bubble reports.
 
Spookily similar pattern, eh. possums?

It would be great if "irrational exuberance" in the NZ (esp. AKL) housing market would be contained and real estate underwent a substantial correction of at least 30%, BUT ... in the face of so many vested interests interested in continuously rising prices, it is more likely that the powers that be will find a way to ensure asset inflation, or at least lack of deflation.
 
What a shame. NZ used to be a country that did not offer much of a globalized life-style, but in return you could get a decent roof over the head in a few years. I rather forgo the posh cafes and rubbish and have the freedom back that came with lower house prices.

NZ also used to be a country where the educated youth drained out of the country to Melbourne, Sydney, and Europe.
Thing is you can still choose to forgo the posh cafes and have a cheap roof over your head.  Just don't move to our biggest city if that's what you want.  Here you go, 3 bedrooms, 700m2, $65,000 http://www.realestate.co.nz/2192697 

I was not actually thinking or talking about myself, but thanks for suggesting that 3rd World hut at 65K :-) ... appreciated.
 
The "educated youth" is still pouring out, because the job market in NZ is still a shambles relative to developed countries' as NZ has squandered significant incoming investment by turning it into a housing bubble instead of giving modern industries a chance. Plus now forbidding real estate prices. 

Greg, when are you going to correct the mis-information in this article?  House prices dropped 0.6% in June according to the REINZ.  Why do you say they rose 3.3%?

Maybe the hot money flows are being restricted.....not that NZ is affected by that of course.
 
"This means that far from indicating a recovery, as the recent surge in the high end of the US housing segment had long been touted, all the relentless move higher in ultraluxury properties prices was simply a recycling of China's hot money, which unlike in the US, never made its way into the Chinese stock market (explaining why the Shanghai Composite has barely budged in years) and merely ended up in US real estate. If anything, this is simply another confirmation of the epic capital misallocation, and the complete lack of "trickle down" resulting from failed global central banking policies".
 
http://www.zerohedge.com/news/2014-07-10/did-china-just-crush-us-housing...

Wishywashy westpac. A bob each way should do it ! Dont stray too far from the fence !