PHOTO: House prices predicted to continue increasing following 11 percent annual growth in 2020. Credits: Newshub; Image – The AM Show
A property market expert says a prediction house prices will stop rising in 2021 because no one can afford them isn’t true.
The cost of borrowing and servicing a mortgage for a property is actually cheaper than ever, Ashley Church told Newshub, but with purchase prices at record highs most people don’t realise it.
Analysts CoreLogic on Tuesday said prices would continue to rise in the first half of this year, but it can’t go on forever.
“Later in 2021 the potential flow-on impact of such strong growth will eventually be outright unaffordability reducing the pool of buyers able to borrow enough to participate in the market,” its House Price Index for December said.
“At this point there will need to be an adjustment of expectations from both vendors and buyers.”
House prices surged to record highs in 2020, ignoring the pandemic and recession, as interest rates fell and supply failed to keep up with demand.
Church, who used to head the Property Institute of New Zealand, said unlike past booms this one’s causes are obvious.
“Every time there’s been an increase or the beginning of a boom and property prices have started to take off again, there have been all sorts of phantom causes that have been put out by various parties. What happens is they spend a couple of years being percolated and eventually the Government passes legislation then we find out down the track they’re not actually the real causes. A good example of that would be the foreign buyers ban – which addressed an issue that didn’t actually exist.
“What’s different this time is the causes it’s being attributed to are the real reason.”
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