25 Sep 2023

First-home buyers, immigration driving housing market up - report

5:34 pm on 25 September 2023
Christchurch based housing

Photo: RNZ / Nate McKinnon

Prices are rising in the housing market but the uptick may not last to the other side of next year.

ANZ's latest Property Focus report showed the country's median house price rose 0.7 percent in each of the last three months.

The bank's economists have raised their outlook, with prices forecast to rise 4 percent over the second half of this year.

The strength was due to first-home buyers purchasing homes and close to 100,000 migrants entering the country over the last year.

"House prices have been moving higher at a steady pace, rising 0.7 percent in each of the last three months. Annualised, that's a solid 8.7 percent per annum," ANZ economist Andre Castaing said.

While the market was heating up, the number of days taken to sell were still above their long-term average and sales were still weak relative to history.

"It would be a stretch to call the market hot right now," he said.

Despite the improved outlook for house price rises of 4 percent, up from the previous bank forecast of 3 percent, ANZ economist Andre Castaing did not expect a sustained increase.

"We think that the Reserve Bank, one way or another - either through keeping interest rates where they are now for longer, or by raising them even further - will need to put them up," he said.

"Those higher mortgage rates will flow through the economy and slow the rate of house price growth.

"And it will mean through the back end of next year it slows down."

Castaing said if immigration slowed, house price momentum may also soften at a faster rate.

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