Housing Demand Remains Subdued in New Zealand

In recent years, housing values have fluctuated dramatically in Newzealand. Following a surge in pricing and sales during the first two years of the pandemic, the market saw widespread price decreases followed by a period of stability. Significant changes in monetary policy, government policy changes, population growth patterns, and new housing supply all contributed to this volatility.

According to the Reserve Bank of New Zealand’s Te Pūtea Matua Financial Stability Report, housing market activity in New Zealand is now muted, with interest rates being elevated. Households have remained resilient despite major price increases and decreases during the previous four years.

Over the last several years, New Zealand has experienced a increase in in home prices.

In recent years, housing values have fluctuated dramatically in New Zealand. Following a surge in pricing and sales during the first two years of the pandemic, the market saw widespread price decreases followed by a period of stability. Significant changes in monetary policy, government policy changes, population growth patterns, and new housing supply all contributed to this volatility.

Houses and land make up the majority of New Zealand residents’ wealth, with home loans accounting for more than 60% of bank lending. The durability of housing values, as well as the possibility of a correction, are important for financial stability. When housing prices are much above sustainable levels, there is a danger of a quick fall, resulting in huge losses for banks’ mortgage loans. A healthy financial system is vital to New Zealand’s long-term economic prosperity and well-being.

House prices and sales Chart
In the Chart Monthly turnover compares the monthly number of house sales to the total estimated dwelling stock in New Zealand.

The chart depicts property sales and prices in New Zealand. House prices peaked in late 2021, decreased by around 14% over the next 18 months, and have since been constant. Over the last two years, house sales have been lower than their historical averages.

Borrowers’ ability to take on more debt grows as monetary policy is relaxed. However, the worsening economic climate implies that households are becoming cautious. Interest rates remain high by recent standards, and loan growth has been slow over the last year. It is unknown when and how much demand for new borrowing will increase.

The New Zealand government is implementing legislative measures to improve long-term supply responsiveness in the housing market. Better supply responses to housing demand will assist to bringing down future housing prices c and will make housing more affordable. Linking borrowers’ eligibility with Debt-to-income limitations will also help to moderate demand cycles and reduce risk accumulation.

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