New Zealand’s house prices likely to fall in 2018 in response to rising mortgage rates and regulatory changes: Westpac Research

New Zealand’s housing market continued its run of the recent improvement in November. REINZ data, seasonally adjusted by Westpac, registered a 4.1 percent lift in house sales in November, after a 3.4 percent lift in October. This takes house sales back to a level last seen in May, although sales are still 9 percent lower than a year ago.

House price behavior can be divided into two broad regions. House prices in the North of New Zealand (Northland, Auckland, Waikato and Bay of Plenty) continued with their recent trend of recovery. In this part of the country, prices fell in early- to mid-2017 but have mostly been rising since August. In the remainder of New Zealand, monthly price changes were weaker.

Further, Wellington registered a 1 percent seasonally adjusted lift in prices, but many other Central and Southern regions declined in price. In this part of New Zealand, house prices rose very rapidly right through to early 2017, but markets have subsequently slowed sharply. 

This pickup in house sales, and the fact that prices are rising again in Northern New Zealand, is no surprise. With the election out of the way and mortgage rates trickling lower, we said then that we expected a few more months of housing market improvement. We now have the added possibility of a rush to beat restrictions on foreign purchases and tax changes (although house sales were down in Auckland, the most speculative market, suggesting that this is not yet a factor). 

"We expect housing market data to be similarly strong in December and possibly January. But over 2018 we expect New Zealand house prices to fall in response to rising mortgage rates and regulatory changes," Westpac Research commented in its recent report.

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