House prices have dived the past year as the central bank raises interest rates to fight inflation. — Bloomberg
WELLINGTON: New Zealand annual house sales have slumped to the lowest in almost 40 years as prices plunge amid rising interest rates.
There were 60,589 sales in the 12 months through February, CoreLogic New Zealand said yesterday.
That’s down 33% from the year through February 2022 and is the lowest annual tally since October 1983.
Sales in February alone were the lowest for that month since 1981.
House prices have dived the past year as the central bank raises interest rates to fight inflation.
While there are signs that borrowing costs are nearing a peak, the prospect of a recession in 2023 continues to push values lower, prompting buyers to stay out of the market.
“Buyers who have secured finance know that they can take their time, with listings abundant and prices falling,” said Kelvin Davidson, Corelogic NZ’s chief property economist. “This is a recipe for low levels of sales.”
CoreLogic estimates there are 16% more properties listed for sale than a year ago.
First-home buyers bought a smaller share of properties in February, which may signal that some are reaching their limit in the face of high interest rates, Davidson said.
The average two-year home loan interest rate in February was about 6.5% compared with 4.1% a year earlier, according to Reserve Bank data for borrowers with a 20% deposit.
House prices have dropped 14% the past year and economists see further falls in the year ahead.
The outlook for the labour market in a slowing economy will be a key driver of the extent of the decline, Davidson said.
“If employment can stay high with unemployment only rising because of a larger labour force, this should insulate property values to some degree,” he said.
“Outright job losses would be a fresh headwind for the housing market.” — Bloomberg
