Property prices across New Zealand are projected to rise significantly over the year, according to banking giant Westpac.
Dominick Stephens, chief economist at Westpac, said that the banking giant is “forecasting a further 17% rise in house prices over this year – a very strong pace compared to history, but implicitly a slowdown from the current monthly pace.”
Read more: Westpac updates OCR forecast
“We believe that mortgage rates have reached their lows for this cycle, with long-term interest rates now starting to head higher as global economic sentiment improves,” Stephens said in Westpac’s latest economic overview. “The impact will become greater as the prospect of OCR hikes draws closer – we expect house price inflation to turn negative by 2024.”
As for housing supply, Westpac said that “the ground has already shifted” with the construction sector turning out to be “one of the surprise stars of 2020.”
“The severe housing shortages that have been dogging New Zealand are now rapidly eroding,” said Stephens. “This building boom is coming at a time when population growth has plunged to its lowest rate in a decade. Net migration has been close to zero since COVID-19 struck, a far cry from the 70,000 net migrants the country received in 2019. This means that the severe housing shortages that have been dogging New Zealand for years are now rapidly eroding. By our estimates, housing shortages will continue to shrink even after migration resumes, because today’s level of construction activity is so much higher than what is needed to keep pace with population growth even in a normal year.”