Westpac revises house price rise forecast, anticipates 10% growth
Residential rents are rising, mortgage interest rates are sinking and house prices have just been forecast to rise more steeply this year than originally expected.
Dominick Stephens, Westpac chief economist, today also revised his national house price forecast from up 7 per cent this year to up 10 per cent.
“The market has proved slightly stronger than we anticipated. We now expect the current upturn to culminate at a rate of 10 per cent annual house price inflation in the middle of the year,” he wrote in the latest NZ Home Truths.
Activity in the past year showed how financial factors can trump physical supply and demand in the housing market, Stephens said.
“New Zealand construction activity has ramped up substantially while net migration has steadily declined. However, house prices have still shot higher. We think that has been due to a big reduction in interest rates combined with the cancellation of earlier plans to introduce a capital gains,” he wrote.
In related news, StatsNZ and Westpac released new information today showing how rapidly the New Zealand housing market was changing.
Rents rose by up by 10.5 per cent in the year to June 2019, StatsNZ said, from $110.80/week to $122.50/week. Mortgage interest payments fell 9.6 per cent from $88.50/week to $80/week.
Nearly a third of households spent 30 per cent or more of their total household income on housing costs. Renters were about twice as likely than homeowners to spend 40 per cent or more of their household income on housing costs.
Just over one in four or 27.9 per cent of renting households spent 40 per cent or more of their household income on rent and other housing costs in the June 2019 year.