By Veronica Dudei Maia Khongwir
(Reuters) – New Zealand home prices are expected to rise modestly this year and next following a decline in 2024, according to a Reuters poll of housing experts who cited lower interest rates as the key driver.
The Reserve Bank of New Zealand (RBNZ) has cut interest rates by 175 basis points since August, supporting a recovery in house prices, which fell nearly 20% from a late 2021 peak.
But that decline is only about half of a more than 40% surge during the pandemic, leaving housing prohibitively expensive for many would-be first-time buyers.
Lower rates, however, may make one of the most expensive housing markets among OECD countries slightly more affordable in the coming year.
Average home prices were forecast to rise 5.0% this year, according to the median forecast from a February 17-26 survey of 12 property market analysts, virtually unchanged from a poll taken three months ago. They are expected to climb another 6.0% in 2026.
“We see a bit more potential upside in the market this year given mortgage rates are falling faster and probably by more than we had been anticipating three to six months ago, but not by a great deal,” said Gareth Kiernan, chief forecaster at Infometrics.
“Given that housing still looks relatively unaffordable, our expectation is that through the course of this year, interest rates will still be a reasonably important driver.”
With the economy still in recession, the RBNZ was forecast to cut rates by another 75 basis points this year to 3.00%, according to a separate Reuters poll.
Asked what will be the primary driver of home prices this year, 10 out of 11 respondents cited lower interest rates, while one pointed to the growing gap between demand and supply.
On affordability for first-time home buyers over the coming year, nine of 10 experts said it would improve while one said it would worsen.
However, slow wage growth and high unemployment continue to pose challenges for buyers, as the average asking price for a property was NZ$750,000 ($427,575) in January, according to REINZ.
This price is approximately six times the average household income, and seven times in Auckland, the country’s largest city.
“The housing market has been subdued over recent years and so there is scope for a recovery. However, once that recovery builds… affordability will remain a constraint on house price growth moving forward into the medium term,” said Henry Russell, economist at ANZ.
“So it’s a story of relative improvement versus in the absolute sense affordability remaining stretched. The important distinction to make is that yes, affordability has improved relative to where it was, but in an absolute sense house prices remain very unaffordable for New Zealanders.”
($1 = 1.7541 New Zealand dollars)
(Other stories from the Q1 global Reuters housing poll)
(Reporting by Veronica Dudei Maia Khongwir; Polling by Vijayalakshmi Srinivasan; Editing by Vivek Mishra, Ross Finley and Ros Russell)
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