Low interest rates will continue driving house prices – broker

He says we can expect to hit $1m by 2030

Low interest rates will continue driving house prices – broker

The housing market may see short-term ups and downs, but Squirrel’s John Bolton says he is confident that the average New Zealand house price will continue to rise, driven primarily by the super-low interest rate environment.

Bolton says that New Zealand is in a relatively good economic position with a stable government, but that global uncertainty still could feed through to the housing market over the coming year. However, he says it is likely that we haven’t seen the full effects of COVID yet, and that some businesses will almost certainly not survive another winter with closed borders.

Read more: Banks “too pessimistic” after COVID-19 and April lockdown

“Looking forward to next year, there’s still a lot of uncertainty in the world,” Bolton commented.

“Locally, it’s getting more and more settled. We’ve got a stable and clear government, and things look pretty good. But it could get worse next year – the tourism sector still hasn’t felt the full brunt of COVID yet and I think there will be a lot of businesses who don’t survive past the summer, and they certainly can’t go another winter without tourists.”

“There are still some things that are quite challenging in this economy, but offshore we have a global economy that’s really struggling with COVID,” he added.

“There’s certainly a risk to share markets globally, and those could see a correction at any time. These kind of things could hit confidence, and if they do, that could flow through into the housing market.”

Bolton says that by 2030, the average house price in New Zealand is likely to hit $1 million, and this will primarily a result of an ongoing low interest rate environment.

“I still stand by that prediction,” Bolton said. “My long-term view is of house prices going up, fundamentally driven by low interest rates.”

Read more: Increased business confidence drives capital demand

“When you have interest rates of 2-2.5%, that’s going to translate into the house prices,” he explained.

“They might go up and down a bit, and there might be times in the market where it’s a bit scarier – there will be all that short-term volatility, but if you take the long view, I feel very confident that with a low interest rate environment, you’re going to see an increase in house prices over time.”