The latest forecast for New Zealand property values has been revealed, and it’s grim news for mortgage holders
New Zealand mortgage holders are increasingly vulnerable to interest rate rises, while property values could drop by 12% in the next three years, according to a new forecasting report.
Economic forecasting company Infometrics said there were a number of key risks hanging over the economy, despite overall optimism in certain sectors such as construction.
This optimism is tempered by concern about international interest rates, retail rates and longer-term mortgages rates, which were all rising.
Chief forecaster Gareth Kiernan told Radio NZ that growth would not continue at the rapid rate currently enjoyed by property owners.
"You think about the scenario over the next couple of years, as interest rates start to rise, at the same time we're likely to see net migration pulling back from its peak as well, conditions for the property market are not going to be so favourable."
Higher interest rates would stretch people in Auckland who serviced big mortgages, he said.
"It could knee-cap the market, or at least slow the market down."
Affordability was not such an issue outside of Auckland, he said.
"We could be building at fairly rapid rates around some of those areas at the same time as demand is easing, so that is a recipe for some sort of oversupply to come through and prices to pull back."
However, other commentators are less pessimistic. Radio NZ reported that ANZ
's chief economist, Cameron Bagrie
, said it would take a recession and a complete halt in migration to spark a fall in property values as rapid as Infometrics predicted. Bagrie added that a 12% drop was unlikely.
"The housing market is going to moderate, it's going to slow, it's going to ease up but I think it's pretty hard to engineer at the moment a dramatic-style fall, unless we see the New Zealand economy testing with the idea of an economic recession, which I don't think is on the cards any time soon."
Bagrie said the fundamental shortage of property, particularly in Auckland, would keep house prices firm.