Slowdown in New Zealand home prices could be disrupted by foreclosure

(Bloomberg) – New Zealand could see a near-term resurgence in house price inflation as a nationwide foreclosure makes it harder to list new properties.

As government and central bank measures to contain one of the world’s hottest housing markets appear to be having an impact, the lockdown to tackle a community Covid-19 outbreak is disrupting progress, according to reports on the real estate market.

New listings fell to around 150 a day in August, from an average of 300 to 500, Wellington website realestate.co.nz said on Wednesday. Real estate agent valuations fell 52% after the foreclosure was imposed on Aug. 18, CoreLogic New Zealand said.

“Through the blockages, it is more difficult for agents to find leads and for sellers to prepare their property for sale,” said Nick Goodall, head of research at CoreLogic. “This further tightening in supply could lead to further temporary upward pressure on prices as pent-up demand competes for limited listings.”

New Zealand policymakers have put in place a series of measures to cool the housing market after annual price increases hit more than 30%, posing a risk to financial stability. The government has already changed tax rules for real estate investors in an attempt to curb demand and the Reserve Bank is restricting the amount of low deposit loans banks can make.

These measures had shown the first signs of operation, the monthly rate of increases in house prices slowing.

However, the current foreclosure, now entering its third week, has prompted the RBNZ to delay an interest rate hike that would have pushed mortgage rates higher.

The central bank seems eager to continue monetary tightening at its next opportunity in October. Any rebound in house prices is therefore likely to be short-lived, Goodall said.

© 2021 Bloomberg LP

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