BENGALURU: New Zealand house prices are forecast to reverse a recent decline and rise 6.0 per cent next year as interest rate cuts from the Reserve Bank of New Zealand take effect, according to a Reuters poll of property strategists.
Despite aggressive interest rate rises, home prices in New Zealand are just 19 per cent below their November 2021 peak, less than half their over 40 per cent surge during the COVID-19 pandemic.
While a sharp rise in interest rates from 0.25 per cent to 5.50 per cent from October 2021 to May 2023 did not result in a housing market crash, it tamed an overheating market.
Average house prices fell nationally from this year's peak of NZ$800,000 (US$500,960) in March to NZ$753,000 in July, according to REINZ data.
The median forecast from an Aug. 20-30 survey of 11 property market analysts estimated a 1.0 per cent average price rise this calendar year, down from 4.5 per cent predicted in a May poll. Forecasts ranged from -4.0 per cent to 2.5 per cent.
That was in sharp contrast to the 6.3 per cent gains predicted for Australian home prices this year.
"While the near-term momentum would suggest house prices will remain weak in the coming months, certainly towards the end of the year and into 2025 we do expect to see a pickup in activity as the impacts of low mortgage rates flow through," said Henry Russell, economist at ANZ.
"There's a lot of headwinds still facing the market from rising unemployment and a weaker economy. But on the flip side of that, it's still uncertain how much of an impact lower interest rates will have on the market and whether that will see confidence return more quickly than we anticipate."
Average house prices were expected to rise by 6.0 per cent and 5.0 per cent next year and in 2026, respectively.
The RBNZ cut interest rates by 25 basis points at its August meeting and is forecast to cut them another 50 basis points this year and 125 more in 2025.
Asked what would happen to purchasing affordability for first-time home buyers in the coming year, six of eight analysts said it would improve. Two said it would worsen.
"Affordability should be improving because we've got substantial declines in interest rates coming through. So that will be affecting the actual debt servicing costs people pay," said Nick Tuffley, chief economist at ASB Bank.
"There's more of a mood of confidence amongst people and that's likely to filter through into the housing market over the coming months."
(Other stories from the Q3 global Reuters housing poll)