New Zealand Archives - Amora Escapes

NZ Slumps to Near Bottom in International House Price Growth Ranks

Rick Casey — Fri, 21 Jul 2023 17:41:31 +0000

New Zealand now has the second-slowest rate of house price growth in the world, an international property consultancy says.

The Knight Frank Global House Price Index shows average house price increases across 56 countries slowed to 3.6% in the year ending March.

Increases were down from 5.7% in the previous quarter, and from a peak of 11.1% in the year ending March 2022, which was when housing markets boomed in the aftermath of the pandemic.

While 17 of the countries tracked recorded annual price falls, New Zealand exemplified the change in market trajectory.

Two years ago, the country was at number two on the index, with a price increase of 22.1% in the year to March 2021.

But in the latest index it was ranked number 55 out of 56 countries, with a price decrease of 13% in the year to March.

Only South Korea had a bigger decline, with prices down 15.7% annually.

Turkey was ranked number one, with prices up 132.8% annually, but it was noted that was largely due to the country’s rampant inflation, which was near 40% in May.

ROSS GIBLIN/STUFF

New Zealand’s house price growth is now ranked 55 out of 56 countries.

North Macedonia and Croatia took out the second and third places with increases of 18.8% and 17.3% respectively. Also, in the top five were Hungary and Lithuania at 16.6% and 15.3%.

The United Kingdom, Australia and Canada were ranked at 47, 48 and 50 with price falls of 3.1%, 5% and 6.9%.

Knight Frank global head of research Liam Bailey said prices globally were under pressure as central banks tried to rein in inflation, and were rising at the slowest annual rate since the third quarter of 2015.

While the latest figures revealed a substantial slowdown in annual price increases, quarterly increases had improved, he said.

“Global house prices contracted 0.6% in the final three months of 2022, and yet there was a 1.5% rise in the first three months of 2023.”

On its own, the reversal did not confirm that global markets were set to improve, he said.

“Rather, it highlights that tight supply, limited new housing construction and strong household formation are acting to underpin prices in many markets.”

STUFF

New Zealand may be one of the first to exit the global housing market slowdown.

New Zealand had seen one of the biggest corrections in prices in the current cycle, but it might soon point to an exit route from the global housing slowdown, he said.

“While prices are likely to fall further, the speed and depth of the correction suggest an uptick in both demand, and eventually prices will come back earlier than in many other developed markets.

“ANZ bank expects growth in both metrics before the end of the year.”

There were still several risks ahead for most markets, and inflation remained the main issue, he said.

Over recent weeks claims from commentators that New Zealand’s housing downturn had started to bottom out have increased, although some believed there was further to go.

ANZ, ASB, BNZ and Westpac have all said there were signs the market was turning, and revised up their forecasts to anticipate very moderate price increases over the second half of this year.

But CoreLogic’s latest figures suggested there might be more market volatility to come as the national rate of price falls almost doubled in June compared to the month before.

CoreLogic head of research Nick Goodall said market conditions remained diverse, but he believed the worst of the downturn was generally over for most areas.

Most commentators have said that while the downturn might be coming to an end, it did not mean the market was about to boom again.

Despite the steep fall in prices since the peak of the market, they remained at higher levels than they were pre-Covid, and affordability was still stretched.

Source : Stuff

The post NZ Slumps to Near Bottom in International House Price Growth Ranks appeared first on Amora Escapes.

Sign that Australian house prices will drop even further in 2023

Leon Clarke — Sun, 25 Dec 2022 10:04:39 +0000

It’s impossible to predict the future but there is one way to get an indication of what will happen to Australian house prices in 2023 – and that’s to look over the ditch.

Since the Reserve Bank of New Zealand (RBNZ) kicked off the current interest rate rise cycle in October 2021, New Zealand has been the bellwether for housing markets and economies across the developed world.

Other central banks around the globe joined the RBNZ in aggressively raising interest rates, despite some central banks such as the RBA being late to join the effort to fight inflation.

Since Kiwi housing prices peaked in November of last year, they have fallen by 13.7 per cent nationally, with Auckland and Wellington leading the nation down, with prices falling by 18.3 per cent and 21.6 per cent respectively.

Australian house prices are dropping but where will they land?

Despite these sizeable falls, the New Zealand housing market is showing no sign that prices will stop their downward trajectory any time soon.

According to data from the Real Estate Institute of New Zealand, prices nationally fell by 1.4 per cent in November, with New Zealand’s biggest market Auckland, showing a large 1.9 per cent fall for the month.

As prices continue to rapidly fall across the Tasman, this raises a pertinent question for the Australian housing market – is New Zealand providing us with a glimpse of what could await Australia in 2023?

A look at housing around the world

While there are naturally several key differences between the Aussie and Kiwi housing markets, its worth noting that the price falls seen in New Zealand are not unique.

In Sweden, housing prices have fallen by 15 per cent nationally. In some of the largest housing markets in the United States housing prices are falling faster than during the global financial crisis recession, with markets like Seattle and San Francisco down by 9.5 per cent and 11.6 per cent respectively, in just four months.

House prices are dramatically down in the US. Picture: Mario Tama/Getty Images North America/Getty Images via AFP

In Canada, which shares property investor incentives like a capital-gains tax discount and negative gearing with Australia, housing prices nationally have fallen 10 per cent since their peak in February.

In every nation there are different conditions, priorities and government interventions that can influence the direction of housing markets.

Some key differences

When contrasting Australia and New Zealand there are notable differences. In Australia, property investors can claim losses on the rental properties against their income from other sources including their employment.

In New Zealand, the Ardern government ended negative gearing for new purchasers in September 2021, with the ability of existing property investors being able to continue to negatively gear being phased out by the end of March of 2025.

Despite a recent push from independent Tasmanian MP Andrew Wilkie to end negative gearing, the Albanese government has shown no interest in pursuing any change to the policy.

Australia also has the capital gains tax discount to incentivises property investors into the market. All investments held for over a year are entitled to a 50 per cent discount on the tax payable on whatever capital gains that are made.

Negative gearing and capital gains tax will impact Australia’s property market. Picture: Brendan Smialowski/AFP

In New Zealand, there is no capital gains tax discount in this manner, with property investors instead having to hold a property for 10 years in order to pay no tax on the profits made on a potential sale.

There is also the issue of immigration where the approach of New Zealand and Australia couldn’t be more different. In New Zealand, in the year to September, migration figures saw 8400 leave in net terms. In Australia, in the year to June, net migration came in at 171,000 in net terms.

Polar opposite approaches to monetary policy

In New Zealand, the nation’s central bank recently forecast a recession for 2023. Yet despite seeing a recession on the horizon, the RBNZ also raised interest rates by 0.75 per cent to 4.25 per cent in practically the same breath.

The RBNZ sees the writing on the wall for an economic downturn, yet is also predicting that its cash rate will peak at around 5.5 per cent, another 1.25 per cent worth of rate rises from its current level.

Last week, RBNZ Governor Adrian Orr was asked by Kiwi politicians if the central bank was intentionally engineering a recession.

“That is correct,” Orr replied. “We are deliberately trying to slow aggregate spending in the economy. The quicker inflationary expectations come down, the less work we need to do and the less likely it is that we have a prolonged period of low or negative growth.”

In Australia, the RBA is taking a very different approach despite some of the key underlying fundamentals sharing similar figures.

The latest quarterly CPI has inflation pegged at 7.3 per cent in the year to September, in New Zealand it’s 7.2 per cent. In New Zealand, the Labour Cost Index is running at 3.4 per cent growth annually, while Australia’s Wage Price Index (WPI) recently recorded 3.1 per cent growth in the past year.

Despite these relative similarities, forecasts from the major banks of the peak of the RBA cash rate range from 3.35 per cent to 3.85 per cent, significantly below the current 4.25 per cent RBNZ cash rate and in an entirely different ballpark to the forecast peak of 5.5 per cent in New Zealand.

House prices in Australia in 2023

Amid the sea of red ink stemming from housing markets throughout most of the developed world, the big question is can Australia once again avoid the worst of it, as it did during the Global Financial Crisis.

On paper, Australia shares a great many similarities with Canada, where prices are crashing in some locales. Both nations have extremely high levels of immigration, negative gearing and a form of capital gains tax discount.

But what Australia has that most of the developed world doesn’t is a heavily bulk commodity reliant economy and low levels of federal government debt. If inflation does come down sufficiently, this could give the federal government the scope to once again throw money at the housing market in the name of affordability, despite numerous reports concluding this type of intervention has the opposite effect.

Ultimately, the fate of the Australian housing market may be decided beyond our shores, by the strength or weakness of a global economy some are increasingly tipping will fall into recession in 2023.

Source : News Com

The post Sign that Australian house prices will drop even further in 2023 appeared first on Amora Escapes.