Aggressive interest rate hikes by the Reserve Bank of New Zealand (RBNZ) continues to hammer the housing market, with vendors slashing prices across the country:
The prices on almost 5000 listings have been slashed in the past three months as more owners get realistic about their property’s worth in the current market…
Almost five times more real estate listings have had their price altered by an average 3.95% in the three months ending May 31, 2022 compared to the same period last year.
Real estate agents made changes to 15% of all residential listings on OneRoof during the same three-month period with almost 50% of those corrections relating to Auckland properties, OneRoof analysis shows…
“A lot of the time what people are doing is they are dropping the price and they are dropping it below where the market is and they are leaving money on the table for their owners” [Wallace Stratton agent Stefan Powney said]…
The vendor price cuts come as average values across New Zealand fell another 1.0% in May, according to Quotable Value (QV):
Average values in May were lower than they were in April in all of them except one…
The average value of all homes throughout the country was $1,030,221 in May, down $10,706 since April and down $33,544 since January…
The biggest declines since the start of this year were in Auckland -$71,543, followed by Wellington Region -$64,849 and Palmerston North -$46,655 (see the table below for the trends in all major centres since the start of the year).
“There’s no question that prices are falling, especially now as buyers take the upper hand in negotiations,” QV General Manager David Nagel said.
“It’s really just a matter of how much further values will fall before finding the new equilibrium…
“With interest rates likely to climb further to battle inflationary pressures, as well as economic uncertainty with the Ukraine conflict and continuing supply chain disruptions, we’ve still got a way to go before the market bottoms out,” Nagel said.
The RBNZ’s ‘forward track’ guidance has the official cash rate (OCR) hitting 3.4% by December, then 3.7% by March and peaking at 3.9% in June 2023. If true, this would nearly double the OCR from its current level of 2.0%.
In turn, the RBNZ has forecast that that average mortgage rates will soar to around 6% in 2023, which would be more than double their pandemic low:
Kiwi borrowers that stretched themselves to enter the housing market last year at rock bottom rates, therefore, face a nightmarish mortgage reset ‘shock’ once their fixed loan terms expire.
A significant house price correction looks ‘baked in’ for New Zealand. Whether it turns into a full blown price crash will depend on whether the RBNZ follows through with its ‘forward track’ guidance.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also Chief Economist and co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
Latest posts by Unconventional Economist (see all)
It’s not that they are trying to help, it’s that they have no choice, skyrocketing inflation is hitting affordability, this morning a manufacturing companies staff went on strike saying they need a 15% increase because they can’t even afford to live and pay rent now. With a estimated 50k-125k of people to leave NZ, mostly will be skilled workers going to oz I think this will please incredible preasure on wages and I don’t see how the RBNZ is going to get out of this death spiral. I think property is now in a no win position and will crash for sure. I read yesterday in NZ media a watermelon was selling for $100 NZ dollars.
pfh007.comMEMBER
“..Kiwi borrowers that stretched themselves to enter the housing market last year at rock bottom rates, therefore, face a nightmarish mortgage reset ‘shock’ once their fixed loan terms expire…”
In other world news
Man who swims with chop tied to ankle is chased by sharks
Ivan
Exactly. The punters need to try to better educate themselves how things work instead of being victims. Harsh but true.
JohnRMEMBER
Taleb: not everything that happens, happens for a reason, but everything that survives, survives for a reason.
Evolution, bcniches.
Mike Herman TroutMEMBER
Very good John. I see what you did there…
Absolute BeachMEMBER
Much Friday ROFL’s. Thanks JohnR
dennisMEMBER
“Almost five times more real estate listings have had their price altered by an average 3.95% in the three months ending May 31, 2022 compared to the same period last year.”
U.S. stocks sank Friday as investors digested two downbeat prints on the U.S. economy.
May data on inflation showed price increases unexpectedly accelerated last month, with consumer prices rising 8.6% year-over-year in May, the most since 1981. Consumer sentiment data released Friday morning came in at a record low, as inflation weighs on American households. … read more via hyperlink above …
A Shocked Wall Street Reacts To Today’s “Scary” CPI Print … Zerohedge
American CPI surprises on the high side; Canada jobs expand; China CPI unchanged and low; India factories busy; Aussie power system faces stress; UST 10yr 3.16%; gold up and oil down; NZ$1 = 63.6 USc; TWI-5 = 71.3 … David Chaston … Interest Co NZ
Good for them.
It’s not that they are trying to help, it’s that they have no choice, skyrocketing inflation is hitting affordability, this morning a manufacturing companies staff went on strike saying they need a 15% increase because they can’t even afford to live and pay rent now. With a estimated 50k-125k of people to leave NZ, mostly will be skilled workers going to oz I think this will please incredible preasure on wages and I don’t see how the RBNZ is going to get out of this death spiral. I think property is now in a no win position and will crash for sure. I read yesterday in NZ media a watermelon was selling for $100 NZ dollars.
“..Kiwi borrowers that stretched themselves to enter the housing market last year at rock bottom rates, therefore, face a nightmarish mortgage reset ‘shock’ once their fixed loan terms expire…”
In other world news
Man who swims with chop tied to ankle is chased by sharks
Exactly. The punters need to try to better educate themselves how things work instead of being victims. Harsh but true.
Taleb: not everything that happens, happens for a reason, but everything that survives, survives for a reason.
Evolution, bcniches.
Very good John. I see what you did there…
Much Friday ROFL’s. Thanks JohnR
“Almost five times more real estate listings have had their price altered by an average 3.95% in the three months ending May 31, 2022 compared to the same period last year.”
OMG
https://ae01.alicdn.com/kf/HTB1.NucJXXXXXX1XFXXq6xXFXXX4/Oil-painting-Scream-by-Edvard-Munch-famous-oil-painting-on-canvas-for-wall-decoration-high-quality.jpg
This is our future.
Looking forward to this being our prospect in 6 months.
18mths for sure.
Jacinta can just hug it out.
United States … Stocks sink after inflation soars by most since 1981 to 8.6% yoy …
Stock market news live updates: Stocks sink after inflation soars by most since 1981 … Emily McCormick … Yahoo Finance
https://finance.yahoo.com/news/stock-market-news-live-updates-june-10-2022-111928913.html
https://finance.yahoo.com/
U.S. stocks sank Friday as investors digested two downbeat prints on the U.S. economy.
May data on inflation showed price increases unexpectedly accelerated last month, with consumer prices rising 8.6% year-over-year in May, the most since 1981. Consumer sentiment data released Friday morning came in at a record low, as inflation weighs on American households. … read more via hyperlink above …
A Shocked Wall Street Reacts To Today’s “Scary” CPI Print … Zerohedge
https://www.zerohedge.com/markets/shocked-wall-street-reacts-todays-scorching-cpi-print
“The Fed Now Has Good Reason To Surprise Markets”: Barclays Is First Bank To Call For 75bps Next Week … Zerohedge
https://www.zerohedge.com/markets/fed-now-has-good-reason-surprise-markets-barclays-first-bank-call-75bps-next-week
Interest Co NZ Morning Briefing …
American CPI surprises on the high side; Canada jobs expand; China CPI unchanged and low; India factories busy; Aussie power system faces stress; UST 10yr 3.16%; gold up and oil down; NZ$1 = 63.6 USc; TWI-5 = 71.3 … David Chaston … Interest Co NZ
https://www.interest.co.nz/business/116303/american-coi-surprises-high-side-canada-jobs-expand-china-cpi-unchanged-and-low
.
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Fewer properties offered at Barfoot & Thompson’s latest auctions but the sales rate’s almost unchanged …
Overall sales rate of 19% at Barfoot & Thompson’s latest auctions … Greg Ninness … Interest Co NZ
https://www.interest.co.nz/property/116302/overall-sales-rate-19-barfoot-thompsons-latest-auctions
UPPDATE … United States … Stocks sink after inflation soars by most since 1981 to 8.6% yoy …
… An outstanding comprehensive report …
Expect More Shock And Awe From Central Banks… VIDEO … Martin North … Digital Finance Analytics Australia
https://digitalfinanceanalytics.com/blog/expect-more-shock-and-awe-from-central-banks/
https://www.youtube.com/watch?v=5hJORpP54pE
Pop Goes The Mortgage Rate! … VIDEO … Martin North … Digital Finance Analytics
https://digitalfinanceanalytics.com/blog/pop-goes-the-mortgage-rate/
https://www.youtube.com/watch?v=5WNYfykhPwY
Reserve Bank called on to cut NZ’s money supply – fast … Jenée Tibshraeny … New Zealand Herald
https://www.nzherald.co.nz/business/reserve-bank-called-on-to-cut-nzs-money-supply-fast/ZF3VOCQRNZEPOI7P5VJCZ2D4VI/