New Zealand home prices see the fastest drop since the GFC, but early homebuyers are still out of the market

<span>Photography: Xinhua/REX/Shutterstock</span>” src=”https://s.yimg.com/ny/api/res/1.2/nMiJJqYlKu9O5s5FoFdjBg–/YXBwaWQ9aGlnaGxhbmRlcjt3PTk2MDtoPTU3Ng–/https://s.yimg.com/uu/api/res/1.2/zperR4OBrNz6fIMiAXU1zGg- -~B/aD02MDA7dz0xMDAwO2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/theguardian_763/18a270d90dbc8f3fd1fd15ef8f4b0dca” data-src=”https://s.yimg.com/ny/api/res/1.2/nMiJJqYlKu9O5s5FoFdjBg–/YXBwaWQ9aGlnaGxhbmRlcjt3PTk2MDtoPTU3Ng –/https://s.yimg.com/uu/api/res/1.2/zpeR4OBrNz6fIMiAXU1zGg–~B/aD02MDA7dz0xMDAwO2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/theguardian_763/18a270d90dbc8f3fd1fd15efca”</div>
</div>
</div>
<p><figcaption class=Photography: Xinhua/REX/Shutterstock

New Zealand home prices are experiencing the fastest drop in value since the global financial crisis, but many first-time homebuyers remain homeless due to an inflated market, cost-of-living crisis and rising interest rates. .

New Zealand has been plagued by a runaway housing market for years. Wellington and Auckland are among the least affordable housing markets in the world, and property rates have been falling since the early 1990s across all age groups, but especially for people in their 20s and 30s. The average national house price is now over NZ$1 million.

Property analytics firm CoreLogic released its latest home price index on Tuesday. It shows that the current market downturn dragged further into July, with national property values ​​falling another 0.9%, taking the quarterly drop to 2.5% – the biggest since October 2008, when the market was pulling back from global financial crisis.

Related: New Zealand home prices soar despite Covid recession, worsening affordability crisis

Each of the country’s six major cities has seen price drops – but there have been some sharp drops in the Wellington area.

“Considering the growth rate in Wellington less than a year ago – at 36% – the fact that in less than a year it has fallen into negative territory is quite remarkable,” Nick Goodall, head of research at CoreLogic, told RNZ.

The capital could see an annual decline of 25% to 28% if current rates stay on course, Goodall said, but at this stage the overall declines do not signal that a housing collapse is imminent.

“The relatively controlled nature of this slowdown is unlikely to sound alarm bells for those in the RBNZ [Reserve Bank of New Zealand] especially after such a sharp rise in values ​​before the end of 2021.”

With inflation hitting a three-decade high of 7.3%, the RBNZ will prioritize keeping inflation low by raising the official cash rate, he said.

Home values ​​soared during the first year of the pandemic – average home prices rose 31% in the year to July 2021 – spurred on by government policies to prevent a market slump.

“[The government] made all the stops and sent signals to home buyers and sellers that they would not allow the housing market to collapse,” said Michael Rehm, senior professor of property at the University of Auckland.

“In New Zealand, we love our property… it’s often seen as a one-way bet… and with government support, it was a no-brainer.”

Disbursed investors and buyers flooded the market. The government then tried to correct the situation by limiting investors and updating responsible lending codes. The country is starting to see the effects of these policies, Rehm said.

But even with home prices falling and forecast to continue falling, first-time homebuyers will struggle to climb the ladder.

Home prices would need to drop by as much as 70% to reach an affordable level that doesn’t overwhelm families, Rehm said, adding that this is an aspirational number, not a realistic one.

“You can imagine the amount of money families are putting into buying a house, getting the deposit, paying the mortgage, but also having to pay a lot more interest than they should – house prices should never have been so disconnected from income. .”

Leave a Reply

Your email address will not be published.