NZ house prices to rise now, stall later

New Zealand house prices may rise 5 per cent in 2012 before growth stalls next year because of rising interest rates and a boost in construction, says Westpac chief economist Dominick Stephens.

 
 

New Zealand house prices may rise 5 per cent in 2012 before growth stalls next year because of rising interest rates and a boost in construction, says Westpac chief economist Dominick Stephens.

Relatively low mortgage rates are likely to underpin demand through this year though the rebuild of Christchurch will stoke inflation, spurring the Reserve Bank to raise interest rates starting in 2013, Mr Stephens said.

Westpac expects zero increase in house prices in 2013 and a decline of 1 per cent in each of 2014 and 2015.

The Reserve Bank is expected to raise the official cash rate by 31 basis points from a record low 2.5 per cent over the next 12 months, based on the Overnight Index Swap curve.

Auckland and Christchurch led price gains last year, reflecting shortages of housing.

New Zealand’s largest city experienced significant under-building over the three-years ended June 2011, while the population increased by seven people for each new dwelling consent issued, Westpac said.

In the short term, prices in Auckland and Christchurch could rise more than the 5 percent Westpac is forecasting for the nation as a whole, only to underperform once the shortage in housing has abated.

In other regions, prices fell for most of 2011 and began rising at the end of the year.

 
 

 

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