ANZ economists warn that the stars are aligned for a slowdown in residential construction
ANZ economists estimate that house prices will have fallen by 11% over this year, but also warn that a bigger fall is possible, while residential construction will also suffer the consequences.
In their last Focus on property in New Zealand report that they describe their forecast of an 11% drop in prices this year as a “soft landing” for the housing market, but warn that there are risks of a bigger drop.
“In particular, sharp increases in global interest rate expectations have translated into even higher mortgage rates in New Zealand, and while keeping consumer price index inflation under control with higher policy rates is the best thing to do from a sustainable economy perspective, house prices should face deeper declines in the near term if the risks of rising interest rates continue to materialize.” , says the report.
The report also warns that several factors are likely to reduce new home construction.
“Residential investment is in the firing line as interest rates rise to combat decades-high inflation, falling house prices and shortages of materials and labor continue to add near-term uncertainty while limiting growth potential,” the report said.
“In short, the construction calculus has changed dramatically in the space of a few quarters and the stars are now aligned for a denouement.
“In fact, some indicators are already pointing strongly south, but it’s hard to diagnose if this is more of a story of limited supply or falling demand.
We think it’s a mix of both, but in 2023 weaker demand will be the dominant driver.”