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House prices to fall for six months: ASB

Property prices will fall for the next six months, with house price inflation slowing to 0% by next March, according to ASB economists.

Wednesday, March 18th 2020, 9:22AM

Amid the deepening COVID-19 crisis, ASB's team of economists have revised their prediction for the housing market. They previously predicted house price inflation to soar to 8.6% in June. 

The coronavirus crisis has taken the heat out of the property market, the economists said. Despite record low interest rates, and an OCR cut to 0.25%, the economy is "headed for recession", senior economist Mike Jones added.

Jones said: "The economic fallout from the coronavirus outbreak will have implications for NZ’s 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 March quarter looks to have been a belter for house price inflation, but we now forecast small outright declines in house prices for the June and September quarters."

Jones believes low interest rates will have a "cushioning effect" on the market, as well as the "starting point of strong excess demand". "But risks are nevertheless to the downside," Jones added. 

House prices fell by about 10% through the GFC in 2008, and commentators are concerned the housing market is in line for another correction this year, as people tighten their belts and hold off on home purchases.

There was some bright news for home owners in the report. If the outbreak is brought under control and activity recovers, ASB says price inflation could turn higher "from around Q4".

"However, given we’re in the eye of the storm, longer-term forecasts should be taken with a grain of salt," Jones added.

Independent economist Tony Alexander agreed with ASB's forecast.

"The market will go on hold then move up again once the pandemic flight is over," he told TMM Online.

Tags: ASB Lending

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 3.19 3.19 3.49
AIA Special - 2.69 2.69 2.99
ANZ 4.44 3.15 3.25 ▼3.39
ANZ Special - ▼2.55 ▼2.69 ▼2.79
ASB Bank 4.45 3.19 3.19 3.49
ASB Bank Special - 2.69 2.69 2.99
Bluestone 4.44 4.44 4.44 4.44
BNZ - Classic - 2.65 2.69 2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.25 3.29 3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union South 5.65 4.75 4.75 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 2.60 2.65 2.80
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 3.99 2.58 2.68 2.79
Kainga Ora 4.43 3.29 3.39 3.85
Kiwibank 3.40 3.40 3.54 4.00
Kiwibank - Capped - - - -
Kiwibank - Offset - - - -
Kiwibank Special 3.40 2.65 2.79 3.25
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.49 3.45 3.39 3.69
SBS Bank 4.54 3.29 3.19 3.49
SBS Bank Special - 2.79 2.69 2.99
The Co-operative Bank - Owner Occ 4.40 ▼2.69 ▼2.75 ▼2.99
The Co-operative Bank - Standard 4.40 ▼3.19 ▼3.25 ▼3.49
TSB Bank 5.34 3.59 3.49 3.79
TSB Special 4.54 ▼2.65 2.69 2.99
Wairarapa Building Society 4.99 3.75 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - 2.65 2.69 2.79
Median 4.55 3.19 3.22 3.39

Last updated: 8 July 2020 8:57am

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