New Zealand house prices fall further even as loans get cheaper
[WELLINGTON] New Zealand house prices fell for a second straight month, suggesting the property market lacks momentum even as interest rates fall.
Prices fell 0.1 per cent in May from April, when they declined a revised 0.1 per cent, property consultancy Cotality said on Thursday (Jun 5) in Wellington. The April result was previously reported as a 0.3 per cent increase.
New Zealand's property market remains sluggish even after an aggressive spate of rate cuts by the central bank, mainly because of a large overhang of houses for sale that favours buyers and keeps a lid on values. Home lending is increasing as mortgage interest rates hit three-year lows.
'Lower mortgage rates are clearly going to be bolstering households' confidence as well as their wallets,' said Kelvin Davidson, chief property economist at Cotality in Wellington. 'But it's not one-way traffic. Housing isn't necessarily affordable in absolute terms while the economy and labour market remain constrained too.'
The interest rate on a two-year fixed-rate home loan is now below 5 per cent at most local banks, the lowest since March 2022.
The Reserve Bank of New Zealand (RBNZ) has cut the Official Cash Rate (OCR) by 225 basis points to 3.25 per cent, but last week removed an explicit easing bias. Most economists expect the RBNZ will lower the OCR to 3 per cent in the third quarter but there are questions over whether it will reduce the benchmark further after that.
Today's report showed prices fell 1.6 per cent from the year-earlier month, which was the slowest pace of decline since October.
The monthly price drop 'was fairly trivial and could be reversed next month', said Davidson. 'But anybody who was anticipating a sharp or widespread increase in property values as we got further into 2025 continues to be disappointed.'
Last week, the RBNZ forecast prices will rise 3.5 per cent this year. Cotality's own 5 per cent projection 'is looking a bit strong', Davidson said. BLOOMBERG
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