New Zealand house prices fall in 2022, then rise - Reuters poll.

New Zealand house prices are forecast to fall further this year under pressure from interest rate rises, according to a Reuters poll of real estate analysts who expect a 20% drop from highs to lows, about the same as in a survey conducted three months ago.

One of the world's most unaffordable housing markets, home prices have fallen a little more than 15 percent since peaking in November 2021, a fraction of the 40 percent increase recorded during the pandemic as buyers sought more space with low interest rates.

Despite the Reserve Bank of New Zealand raising interest rates by 525 basis points to 5.50% from October 2021 and maintaining a tight stance, the outlook for house prices has been broadly unchanged over the past three months.

The median forecasts of 11 real estate analysts, obtained between May 16 and May 31, suggest an 8.0% decline in home prices this year, nearly the same as the 9% decline in the previous survey in February.

The analysts, however, believe the market is close to a turning point and forecast a 3.4 percent average increase next year.

Housing prices in New Zealand

"Higher mortgage rates and a less severe housing shortage have cooled the real estate market considerably. With migration increasing and mortgage rates nearing their peak,... we suggest the market is close to a tipping point," wrote ASB economist Nathaniel Keall.

"We expect prices to recover only modestly in the latter part of 2023, but a sharper rebound amid migration is more likely than a significant decline. "

Almost two-thirds of analysts, seven out of eleven, who responded to the supplementary question said a significant rise in house prices was more likely in the near term. The other four believe there are significant declines to come.

The improved outlook is likely to hold back some of the decline in home prices.

Predictions ranged from 14.0%-27.5%.

Home purchase affordability

The central bank said there are early signs that home prices may not be falling as much as previously expected, dashing the hopes of many would-be first-time buyers.

The majority of analysts who responded to a separate question (6 out of 10), however, said that affordability to buy a home would improve over the next year, although many admitted that any change would be marginal. The rest said the situation would worsen.

"We are seeing faster income growth and lower prices, which is making housing a bit more affordable," Kiwibank chief economist Jarrod Kerr said.

"However, the interest rates people are paying are much higher than they were a year ago, which is affecting affordability. In terms of interest rates, they have obviously become more expensive and depressing. "

(For other articles from the Reuters quarterly real estate market survey:)

Reporting by Devayani Satyan; polling by Veronica Khongvir; editing by Hari Kishan, Ross Finley and Sharon Singleton

Our Principles: Thomson Reuters Trust Principles.