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Housing market will take two years to recover

It will take at least two years for house prices to recover to pre-Covid-19 levels, according to new analysis from Westpac.

Wednesday, May 6th 2020, 8:24AM

Dominick Stephens

The big four bank's economists have detailed their predictions for the New Zealand economy and housing market once the nation finally gets over the global pandemic.

They say house prices will fall by 7% during 2020, compared to 10% during the Global Financial Crisis. House prices fell by 3% in the 1990s recession. 

The economists, including Dominick Stephens, say there is "little difference" between regional house price movement during a recession: "For example, following the financial crisis Auckland house prices fell 12% in 18 months, whereas it took 51 months for prices to fall 15% in Hamilton."

Westpac expects house price growth will "remain modest" next year, but will "give way to a rapid period of gains over 2022 and 2023". 

The bank believes the removal of LVR restrictions, record-low OCR, and the delay of capital adequacy rules will help the property market over the next few years.

"This will make mortgages more available and less costly over time. Once the virus disruption passes and confidence eventually returns, low interest rates will result in a very fertile environment for asset prices, including house prices."

While the bank is bullish for the long-term, the near term could be more painful for those expecting capital gains from property sales. 

"Even so, it will be around two years before house prices reclaim their recent highs," the bank added.

Tags: house prices Westpac

« Westpac loan impairments soar to $211 millionMarkets price in strong chance of 0% OCR »

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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 3.85
ANZ Special - 2.65 2.75 3.35
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 2.79 2.79 3.39
The Co-operative Bank - Standard 4.40 3.29 3.29 3.89
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 3.22 3.22 3.44

Last updated: 3 July 2020 8:15am

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