PHOTO: Sold sign outside a house in East Auckland. File photo Photo: RNZ / Claire Eastham-Farrelly
The seemingly out of control housing market is being pegged back, with expectations of a greater fall in prices than previously thought.
The ASB bank is forecasting house prices to fall by 6 percent by the end of the year, bigger than the 2.9 percent drop it previously forecast.
Meanwhile, the ANZ bank is predicting a 7 percent fall.
It comes after the latest Real Estate Institute house price index for January showed a further slow down in price growth, with the number of houses sold falling sharply.
ASB senior economist Mike Jones said the wind was coming out of the housing market’s sails.
“We’ve long been expecting a marked slowdown in house price inflation in this year, driven by the confluence of three major macro negatives – higher mortgage rates, tighter credit conditions and rising supply. These are now all in play.
“But the extent of the apparent credit constriction amounts to an extra handful of sand in the market’s gears that we didn’t previously allow for,” he said.
Jones said the drop in house prices would affect some people’s who have been using their growing paper wealth to back their borrowing.
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