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S&P forecast 10% house price fall

Global ratings agency Standards & Poors is the latest to join the chorus of predictions around potential house price falls in New Zealand – and they’re picking a 10% drop.

Wednesday, June 24th 2020, 10:19AM 1 Comment

by The Landlord

In a new report out today, S&P says they now view the economic risk trend for New Zealand’s banks as negative.

That reflects a one-in-three possibility that the economic impact for the banking sector could be significantly more severe or prolonged than their base case.

But S&P are also forecasting that the increase in economic risks due to the Covid-19 outbreak and containment measures should be substantial but temporary.

In line with this, they now expect New Zealand house prices to fall by about 10% before resuming modest growth around the middle of calendar 2021.

“The near complete lockdown in New Zealand through most of April 2020 placed restrictions on auctions and inspections, curtailing the volume of home sales,” S&P’s analysts say.

“While the government lifted restrictions from June 9, 2020, we expect any rebound in-home sales to be gradual.

“In the longer term, we expect that demand for housing will not be as buoyant as in the past several years as immigration will likely remain non-existent for some time with New Zealand's border closed until further notice.”

However, S&P also expects the large fiscal stimulus from the Government to reduce the severity in house price falls.

Likewise, they expect the six-month moratorium on house loan repayments to restrict distressed sales by property owners.

House prices should stabilise in line with their forecast rebound in economic activity and employment in calendar 2021, the S&P analysts say.

That’s because immigration driven population growth should resume slowly during this time – although it will remain lower than recent peak levels.

“Reduced construction of new homes in recent months is likely to persist in the next 12 months, which should amplify the persistent gap between demand and supply for housing across the country.

“Finally, interest rates are likely to remain low, which should also support price growth when economic conditions improve.”

S&P’s house price predictions are in a similar range to those of many New Zealand economists. ANZ economists are predicting a 12% fall in prices, while Westpac economists are forecasting a 7% drop and ASB’s are suggesting a decline of between 5-10%.

Read more:

Market outlook: what economists have to say 

Market feels Covid-19 impact 

Tags: ANZ ASB average price banks coronavirus Covid-19 home loans house prices housing market landlords median price mortgages price growth property investment S&P sales activity Westpac

« Housing crisis needs building surgeCovid crisis will impact on market - in time »

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Comments from our readers

On 3 July 2020 at 4:29 pm OneBiscuit00 said:
The house price volatility tends to vary among different areas of AKL. But the overall estimation also helps.

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Lender Flt 1yr 2yr 3yr
AIA 5.95 4.85 5.35 5.65
ANZ 5.94 5.95 6.40 6.59
ANZ Blueprint to Build - - - -
ANZ Special - 5.35 5.80 5.99
ASB Bank 5.85 5.35 5.80 5.99
Avanti Finance 5.95 - - -
Basecorp Finance 6.95 - - -
Bluestone 5.89 7.49 8.09 8.19
BNZ - Classic - 5.35 5.69 5.99
BNZ - Mortgage One 5.94 - - -
BNZ - Rapid Repay 5.94 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.94 5.95 6.29 6.59
BNZ - TotalMoney 5.94 - - -
CFML Loans 6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Co-operative Bank - First Home Special - 4.75 - -
Co-operative Bank - Owner Occ 5.85 4.85 5.35 5.65
Co-operative Bank - Standard 5.85 5.35 5.85 6.15
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 ▲5.35 ▲5.85 -
Heartland Bank - Online 4.10 ▲4.90 ▲5.29 ▲5.59
Lender Flt 1yr 2yr 3yr
Heretaunga Building Society 6.10 ▲5.35 ▲5.80 -
HSBC Premier 5.89 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.25 4.39 5.09 5.45
Kainga Ora 5.43 4.57 5.58 5.85
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 5.50 ▲6.19 ▲6.69 ▲6.79
Kiwibank - Offset 5.50 - - -
Kiwibank Special 5.00 ▲5.19 ▲5.69 ▲5.89
Liberty 4.84 - - -
Lender Flt 1yr 2yr 3yr
Nelson Building Society 6.45 5.55 6.15 -
Pepper Money 4.49 - - -
Resimac 6.19 5.60 6.16 6.29
SBS Bank 5.79 ▲5.65 ▲6.09 ▲6.19
SBS Bank Special - ▲5.15 ▲5.59 ▲5.69
Select Home Loans 4.09 4.29 4.86 5.09
TSB Bank ▲6.30 ▲5.65 5.79 ▲6.45
TSB Special ▲5.50 ▲4.85 4.99 ▲5.65
Unity 5.65 4.95 5.55 -
Wairarapa Building Society 5.74 4.95 5.75 -
Westpac 5.94 5.95 6.29 6.59
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.94 - - -
Westpac Special - 5.35 5.69 5.99
Median 5.87 5.35 5.77 5.99

Last updated: 1 July 2022 9:33am

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