BNZ Economists Downgrade Aggressive House Price Increase Forecast to Just 2% by 2024

Date Published: 24 May 2024

Key Facts

• BNZ economists have revised their housing market predictions for New Zealand, expecting house prices to increase just 2% over the next three years.
• This forecast is significantly more conservative than their previous one, which projected a 5% increase in house prices.
• The change of prediction comes amid government housing policy changes and increased regulation in the lending sector.
• Despite this, the ongoing high demand for property and continuing low interest rates are expected to prevent any substantial fall in house prices.

Article Summary

Bank of New Zealand (BNZ) economists have significantly scaled back their predictions for the NZ housing market. They now anticipate a mere 2% increase in house prices over the next three years, compared to their earlier prognosis of a 5% rise. The revised forecast aligns with the recent government policy changes intended to restrain house price inflation.

The modifications in the government policy, such as extending the bright-line test and reducing the ability for property investors to offset mortgage interest costs against rental income, have been instrumental in this market adjustment. Moreover, increased regulation in the lending sector, inclusive of the Reserve Bank’s reintroduction of loan-to-value ratio (LVR) restrictions, is expected to continue influencing the property market.

However, BNZ economists still don’t foresee substantial falls in house prices in the foreseeable future. Contrarily, they predict the prices to remain somewhat stable. This prediction is based on the sustained high demand for property, the strong prospect of continued immigration once borders reopen, and the persistent low-interest-rate environment in NZ.

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