Infometrics leaders talks about new reality for New Zealand's housing market
Brad Olsen (pictured above left), chief economist at Infometrics, recently addressed a Financial Services Council event, providing a sobering outlook for the New Zealand housing market.
Olsen suggested that house prices are likely to remain relatively flat for the next five years, marking a significant shift from the rapid increases seen in the past.
Modest expectations for price movements
“Slightly up is an important shift from previously when it was solidly up all the time,” Olsen told RNZ.
He elaborated that while the market might experience some fluctuations, overall, the trajectory is expected to be sideways or exhibit slight growth.
“You can't bet the house on it anymore when you could before and people did,” he said, indicating a departure from the era of guaranteed high returns on property investments.
Shift in speculation and investment perspectives
Olsen highlighted a changing perspective among speculators and investors, suggesting a more cautious approach to the housing market, RNZ reported.
With many previously seeing rapid gains, the current climate shows a significant cooling, where speculative gains are less likely, and some investors might even incur losses.
Government policies and market adjustments
Olsen pointed out the potential impacts of government policies aimed at freeing up land supply and fostering investment.
“When you start to get that much fuller and stronger expectation that government changes are going to free up land supply and increase investment – when that plays through to forecasts you shouldn't really have increasing house prices to the same degree,” he told RNZ.
Younger generations’ shifting interests
Dean Anderson, founder of Kernel Wealth, commented on the changing interests of younger Kiwis, who are now less inclined towards property investment. This demographic shift is seen as a positive move towards diversifying investments beyond real estate.
Predictions for subdued growth
Kelvin Davidson (pictured above right), chief property economist at CoreLogic, echoed the sentiment of a subdued market outlook.
Davidson noted that various factors, including stretched affordability and potential governmental interventions, might keep house price growth in check, aligning more closely with income growth rather than exceeding it, RNZ reported.
Interest rate impacts and economic predictions
Despite recent interest rate declines potentially stimulating some market activity, the consensus among economists, including Westpac’s chief economist Kelly Eckhold, is that house price increases will align more closely with income levels, possibly averaging around a 5% growth rate in the near future, RNZ reported.
