New Zealand house values fell for the first time in 11 years in July, according to a key indicator.
On Thursday (August 11) in Wellington, the Real Estate Institute reported that its price index had fallen 2.9% from a year earlier, the first decline since 2011. The gauge has been steadily declining over the previous five months, on a monthly basis.
As the Reserve Bank seeks vigorous policy tightening to dampen demand and reduce inflation, home prices have reversed. It’s widely anticipated that the central bank would raise interest rates again next week for the fourth time in as many months, bringing the Official Cash Rate to 3%.
In May, the RBNZ predicted that home prices would decrease 8.1% this year, while bank analysts anticipate losses in the double digits.
According to Jeremy Couchman, senior economist at Kiwibank in Wellington, “house values have further to fall in the present cycle since lending conditions remain tight and confidence is low.” He thinks prices would fall by at least 10% in 2022, and he points out that the CPI has just recently recovered to its May 2021 levels.
Even said, mounting evidence of housing market drops and slowing economic growth implies the RBNZ may need to slow the rate of future tightening.
According to Capital Economics senior economist Marcel Thieliant, “the protracted housing slowdown will impact on activity in earnest soon.” In contrast to the RBNZ’s May projection of a top of 4% for the Official Cash Rate, he anticipates a more modest peak of 3.5% for the OCR this year. BLOOMBERG