Westpac economists have scratched their previous forecast on the housing market as they now expect house prices to continue rising.
Westpac economists, along with other economists in New Zealand, previously expected house prices to decline due to the impacts of the COVID-19 crisis on the housing market. However, Westpac economists now predict a 3.5% increase in house prices between March and December 2020.
Westpac chief economist Dominick Stephens said in the bank's latest Home Truths report that they expected to see a 7% decline, but the “collective predictions of house price decline have been proven wrong” as prices have risen by 2.6% between March and August. New Zealand had also seen three consecutive months of price increases.
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Stephens noted the property market's resilience amid the COVID-19 pandemic and during the lockdown.
“Although house prices have probably been weaker than they otherwise would have been, the surprising resilience of the economy has meant less of an impact on house prices than anticipated,” he said, as reported by Landlords.co.nz.
He pointed out that their previous expectation on property prices was based on the result of the recessions in the early 1990s, 1998, and 2009.
“But all of those past recessions were preceded by a rapid increase in interest rates, whereas the current recession was not,” Stephens continued.
“This unusual feature of the current recession may be teaching us that interest rates play an even more powerful role in determining house prices than previously appreciated.”