Economist says house prices will keep falling through 2022, but when will they recover?

An independent economist believes New Zealand hasn’t seen the last of the decline in house prices in 2022, but there is some good news on the horizon.

Kiwibank is predicting house prices will continue to drop until the end of the year as more new builds come onto the market.

In Kiwibank’s latest housing market note, senior economist Jeremy Couchman said the building industry has been “really busy” over the past year, despite the raft of disruptions.

“From COVID, despite the lack of materials, and despite the difficulty finding staff, StatsNZ estimates a total of over 41,000 homes were built in the year to June 2022.”

Couchman expects Aotearoa’s housing shortage to disappear over the next 12 months and suspects a growing plethora of homes ahead, which will encourage a “slow recovery” in house prices.

“After the post-COVID boom of 2021, the housing market is clearly in retreat.”

Independent economist Tony Alexander told Newshub Live at 8pm on Friday he agrees with Kiwibank’s prediction of house prices continuing to drop.

“We’ve got people looking at net-negative migration flows for New Zealand, so we’re losing people overseas,” he told host Janika ter Ellen.

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“We do have a lot of supply coming on board and people are starting to fixate on that. We do, of course, have fairly high consumer pessimism, people are worried about what they see around them. So I do expect house prices are going to fall, maybe another 5-6 percent, something like that.”

But it isn’t all bad news, with Alexander having a silver lining when looking ahead over the next 12 months.

“Over 2023, I think with some of the interest rates starting to come down, the labour market still being relatively firm, I’d expect to see prices starting to recover a little bit,” he said.

Alexander said it’s the right time for first home buyers to jump into the market as “vendors are capitulating to the market” and want to “make a deal”.

“You ask yourself, what is more important here? Trying to get the last 5 percent out of this decline in prices or securing yourselves a home in which to raise a family when the number of property listings are double what they were a year ago?

“We are only just now reaching the point where vendors, I think, are capitulating to the market. They want to get on with their lives, they want to make a deal.

“If I were a first home buyer at the moment, I’d focus on that long-term goal rather than the last five percent of the price cycle.”