A week ago, independent economist Tony Alexander claimed New Zealand home buyers were being “scared off” by the Reserve Bank’s aggressive interest rate hikes, which have lifted the official cash rate to 4.25%:
New Zealand has lifted interest rates more than anywhere else.
The latest mortgage data from the Reserve Bank certainly supports this view, with the annual value of mortgage commitments plummeting from a peak of $101 billion in September 2021 to $74.7 billion as at October 2022:
New Zealand mortgage commitments crashing.
The latest consumer confidence survey from ANZ-Roy Morgan also shows that house price inflation expectations have collapsed to their lowest level since the depths of the pandemic, suggesting New Zealanders have become increasingly bearish on house prices:
New Zealand house price expectations collapse.
The mortgage results pre-date last month’s 0.75% interest rate increase from the Reserve Bank, which has lifted mortgage rates even higher.
The Reserve Bank’s latest Statement on Monetary Policy forecast further aggressive rate hikes, alongside a recession in 2023 and a 20% peak-to-trough decline in house prices.
No wonder New Zealand home buyers have been “scared off”, with ‘Fear of Missing Out’ (FOMO) replaced with “Fear of Overpaying” (FOOP).
Why buy now when your own central bank has tipped more interest rate hikes, a recession and further house price falls?
