Biggest housing boom in 17 years
According to ASB economists New Zealand is in its biggest housing boom for 17 years, following the latest strong market data.
Tuesday, February 16th 2021, 5:21PM
Figures from the Real Estate Institute of New Zealand revealed that nationwide house price inflation lifted to an annual pace of 19.2% in January, a high last seen in 2004.
ASB described the data as "jaw-dropping".
Wellington house price inflation rose by 26% year-on-year, Gisborne/Hawke's Bay rose by 30.7%, while prices increased by 22.1% in the Bay of Plenty.
In Manawatū-Whanganui houses rose by 26%, while Taranaki saw a 20.5% boost.
ASB said the soaring prices were driven by falling rates and "extraordinarily tight supply. We’ve been noting for some months that sales/new listing ratios, our preferred measure of housing market 'tightness', have been pointing to further acceleration in house prices rather than any signs that the market was about to slow down," the bank added.
Mike Jones, senior economist at ASB, expects the Reserve Bank's new LVR changes to cool the market in the coming months, and believes a construction boom will further slow house price inflation by the end of the year.
ASB expects prices to rise by 10% in total this year.
Dominick Stephens of Westpac has forecast a 17% rise in nationwide house prices this year.
But Stephens expects prices will start to drop in three years time, as the official cash rate begins to rise following record low years.
"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.
"The impact will become greater as the prospect of OCR hikes draws closer; we expect house price inflation to turn negative by 2024," Stephens said.
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