By Veronica Dudei Maia Khongwir
BENGALURU (Reuters) – New Zealand home prices are expected to rise steadily through 2027 as the market recovers after posting annual declines in the last three years, according to a Reuters poll of property analysts who expect further monetary policy easing to boost confidence in the housing market.
Since August, the Reserve Bank of New Zealand (RBNZ) has cut interest rates by 225 basis points, helping the market tick up, and is expected to cut by another 50 basis points by year-end, according to another Reuters poll.
That would help further reduce mortgage rates which have already fallen nearly 20% from when policy rates were at a 15-year high a year ago.
When asked what impact would RBNZ rate cuts have on the market this year, 10 of 12 respondents to an additional question in the May 16-June 4 poll, said they would be stimulative while two said they would have no impact.
Average home prices were forecast to rise 3.8% this year, according to the median forecast of 14 property analysts polled, albeit slower than the 5.0% predicted forecast in a February poll.
“There’s a lot of uncertainty out there at the moment. Buyers are still a little bit more hesitant than we thought. The rebound, although it started, is not quite as strong as we had hoped for,” said Jarrod Kerr, chief economist at Kiwibank.
“We are pushing back our expectations for the recovery more into 2026. It’s not that the story’s changed, it’s just that the story is being delayed.”
Prices are expected to climb 6.0% and 5.1% in 2026 and 2027 respectively.
STILL A STRETCH
Prices boomed during the COVID-19 pandemic and while they have fallen nearly 20% from their late-2021 peak – reversing only around half their COVID gains – the market continues to favour existing homeowners who have built significant equity.
Home prices are approximately six times the average household income and homeownership remains out of reach for many first-time buyers.
With the economy only emerging from a recession late last year and high unemployment weighing on household spending, saving for a deposit remains a challenge for people wanting to make their first step onto the property ladder in one of the most expensive housing markets among OECD countries.
Offering some hope, housing supply in New Zealand has increased over the past few months as buyers are seeking properties with lower price points. Supply of housing increased 6.2% in April from a year ago, according to REINZ.
With borrowing costs falling and supply rising, nine of 11 analysts said purchasing conditions for first-time buyers would improve over the coming year. Two said they would worsen.
“It’s still difficult to get onto the housing ladder. But it was practically impossible by the end of 2021, where house prices went up 50% in two years from levels that people generally agreed were too high to start with,” said Sharon Zollner, chief economist at ANZ.
“We haven’t solved our housing affordability problem but it is easier than it was, so some first home buyers are taking advantage of this opportunity. But New Zealand house prices are still very expensive in an international comparison relative to incomes and rents.”
Urban home rents were expected to rise 3.0% this year according to a smaller sample of forecasters, outpacing the 2.2% inflation rate projected in a separate Reuters poll.
(Other stories from the Q2 Reuters housing market polls)
(Reporting by Veronica Dudei Maia Khongwir; Polling by Rahul Trivedi and Pranoy Krishna; Editing by Jonathan Cable and Toby Chopra)
