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ASB slashes house price forecasts

House price growth will drop away to zero over the coming year, according to ASB who have cut their forecasts in response to the coronavirus crisis.

Tuesday, March 17th 2020, 11:28AM

by Miriam Bell

The bank has just released its latest Home Economics report and it states that the disruptive effects resulting from attempts to contain coronavirus are a gamechanger for New Zealand’s housing market.

Prior to the coronavirus outbreak, the market was rebounding, with exuberance, from the quieter times seen last year.

Sales activity was up significantly in recent months and, because listings remained low, prices were climbing – even in Auckland’s market, which had been in the doldrums for some time.

Economists were predicting strong house price growth nationwide throughout 2020, with even the Reserve Bank forecasting a peak of 7.7% growth in its most recent Monetary Policy Statement in February.

But now – due to the coronavirus crisis - everything has changed.

ASB senior economist Mike Jones says that both the New Zealand and global economies are headed for recession.

“This backdrop of generalised economic uncertainty, plunging business and consumer confidence, doubts about employment prospects, and wealth and income declines will have implications for the property market.

“Both demand and supply are likely to take a knock. Demand is likely to tail off first and listings to follow as sellers pull back and await better conditions.”

The situation has led ASB to slash their house price inflation forecasts accordingly.

They are forecasting small outright declines in house prices for the June and September quarters and they are clipping a full five percentage points off their annual house price forecasts.

This means they now expect annual house price growth to slow to zero by March 2021, as compared to the 5.3% growth predicted previously.

Jones says that assuming the outbreak can be brought to heel and economic activity recovers, they expect house price inflation to turn higher from around the last quarter of this year.

“However, given we’re in the eye of the storm, longer-term forecasts should be taken with a grain of salt. We have more confidence in our short-term, more negative, view.”

It’s worth bearing in mind that the last four times New Zealand experienced or skirted economic recession, annual house price inflation in New Zealand went negative, he adds.

“There are some cushioning effects this time around from current record-low mortgage rates (which could go even lower), a sturdy labour market, and a starting point of strong excess demand. But risks are nevertheless to the downside.”

Earlier this month, and before the latest developments in the battle to contain coronavirus, Westpac chief economist Dominick Stephens warned the coronavirus outbreak could slow house price growth in the three months to June.

He said that house prices could end up "slowing sharply", as the effects of the virus take a hold on the New Zealand economy, impacting consumer confidence.

Despite this, Westpac believes the market will pick up later in the year, helped by lower mortgage rates, he said.

Tags: ASB Auckland confidence coronavirus house prices housing market interest rates investment listings mortgages price growth property investment real estate recession sales activity tenants Westpac

« What coronavirus means for property investorsFreeze on rent rises introduced - temporarily »

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 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 7.74 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 - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 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 6.89 6.55 6.35
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 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
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 7.74 7.09 6.95
SBS Bank Special - 7.14 6.49 6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.84 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.24 6.75 6.39
Median 8.64 7.19 7.17 6.65

Last updated: 20 June 2024 10:39am

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