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Rise, stall then fall predicted for house prices

House prices will rise 5% this year before higher interest rates put the brakes on, and the rapid price rises in Auckland and Christchurch will not be repeated elsewhere.

Tuesday, March 27th 2012, 12:00AM 2 Comments

by The Landlord

That is the view of Westpac chief economist Dominick Stephens, who predicts house prices will rise 5% this year, stall in 2013 then drop 1% in both 2014 and 2015.

In his update on the housing market Stephens says that while the nationwide housing market has strengthened over the past six months, the most remarkable feature has been the variation between regions, especially the price rises in Auckland and Christchurch.

"New Zealand hasn't seen anything like this degree of regional divergence since the 1990s," he said.

Stephens says there is a simple reason why prices have risen so markedly in Auckland and Christchurch - and why these increases don't herald a nationwide trend.

"Our analysis suggests that prices have been rising more quickly in Canterbury and Auckland because both regions are experiencing local housing shortages," he said.

"Auckland and Canterbury house prices have built up a premium over other regions in the past year. This premium can be expected to persist until builders correct the local housing shortages."

Stephens says the earthquake is the obvious factor behind the Canterbury regions housing shortage, while Auckland is suffering from "an extended period of low building activity and high population growth."

He said that over a three year period to June 2011, Auckland's population increased by seven people for each new dwelling consent issued.

Regions unaffected by housing shortages where prices have also risen, such as the rest of the North Island, have been given a "shot in the arm" by low interest rates, Stephens said.

However, he predicts that substantial rate rises over the 2013-2015 period, "would put the brakes on the housing market in short order."

 

 

 

« Prices up but value growth ‘very modest,' says QVNationwide home affordability improves »

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Comments from our readers

On 28 March 2012 at 10:04 am nick said:
As an economist he first needs to go and check the price rises on building materials...everything almost 20 percent more expensive compared to a year ago...
On 28 March 2012 at 11:09 pm Larry said:
Drop 1% in both 2014 and 2015? I doubt it. Do not forget the fact that many property buyers, especially investers, are new immigrants. Their affordability is not affected by New Zealand's economy at all.
Commenting is closed

 

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AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
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BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

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