The Reserve Bank of New Zealand lifted the official cash rate by 25 basis points to 2.75% on 2 September – its second increase in two months.
The decision appears to have further dented confidence in the housing market, with New Zealand home prices continuing to fall 1.5% year-on-year, according to the Real Estate Institute of New Zealand’s (REINZ) leading house price index, which the Reserve Bank uses.
Chart by Justin Fabo (Antipodean Macro)
After peaking in November 2021, New Zealand housing prices have fallen for nearly five years, with the bulk of the decline recorded over the first 18 months and values tracking mostly sideways since.
As a result, real inflation-adjusted housing prices in New Zealand have plummeted back to mid-2017 levels:
Chart by Justin Fabo (Antipodean Macro)
The outlook for housing prices is poor. In addition to the Reserve Bank being in a tightening cycle, for-sale listings are tracking at their highest level in more than a decade:
Chart by Justin Fabo (Antipodean Macro)
The surge in listings comes amid an 11.6% annual decline in sales volumes and a 3-day rise in the median days to sell.
In New Zealand, buyer psychology has transformed from the fear of missing out (FOMO) to the fear of overpaying (FOOP).
I expect the same transformation to happen in Australia, where the market is also likely to experience a deep and prolonged price correction.
