The housing market in New Zealand is expected to see a significant turnaround in the coming year, with house prices forecasted to rise by 6%. Despite a recent decline, prices are still relatively high, being only 19% below their peak in November 2021. The aggressive interest rate rises that had been implemented earlier did not result in a crash but managed to cool down an overheated market.
The Reserve Bank of New Zealand’s decision to cut interest rates is expected to have a positive impact on the housing market. With rates being slashed by 25 basis points in August and further cuts predicted for the future, there is optimism that this will lead to an increase in housing activity. Economists believe that the effects of lower mortgage rates will start to flow through in the coming months, potentially boosting confidence in the market.
Analysts predict an average price rise of 1.0% for this calendar year, a significant drop from the 4.5% increase that was initially expected. However, there is hope for a stronger recovery in the years ahead, with average house prices anticipated to rise by 6.0% and 5.0% in 2025 and 2026, respectively. Despite some headwinds like rising unemployment and a weaker economy, the impact of lower interest rates could lead to a faster return to market confidence.
Concerns about affordability for first-time home buyers have been raised, but six out of eight analysts believe that it will actually improve in the next year. The substantial decline in interest rates is expected to reduce debt servicing costs for buyers, making purchasing a home more feasible for many. This could potentially open up opportunities for more individuals to enter the housing market.
While there are challenges and uncertainties ahead for the New Zealand housing market, the outlook appears to be optimistic. With interest rate cuts and forecasts of price increases, there is hope for a recovery in the market in the coming years. The impact on first-time buyers is expected to be positive, signaling potential growth and stability in the housing sector.
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