She acknowledged that despite this fall, housing affordability had barely improved after prices rose in the order of 50 per cent during the pandemic.
“Housing affordability is not getting any better, as bank serviceability tests rates go up, the amount you can borrow is shrinking faster than house prices are going down.”
PRD chief economist Dr Diaswati Mardiasmo said Australia was on a similar path as New Zealand started its rate rises sooner.
“We will basically follow the same trend. They just started earlier, but we’re a bit more aggressive,” Mardiasmo said.
“It does give us a clue as to what might happen in our country, particularly in the [major] cities … they’re seeing anywhere between 10 to 12 percentage point drops and 5 percentage point drops in regionals.”
Barrenjoey capital chief economist Jo Masters said while it was worth watching New Zealand closely, there are clear differences in Australia that could potentially see households at home better off.
“While it’s true the RBNZ is further ahead in its tightening … they have indicated they are willing to enter restrictive territory, while the RBA wants to go to neutral territory,” Masters said.
New Zealand also introduced legislation last year that tightened home loan assessments, Masters said, which compounded the effect of rate hikes.
“Given that, you would expect their housing market to fall faster and further,” she said.
Lastly, more New Zealand households took on bigger debts in relation to incomes, Masters said.
“The leverage in Auckland is much greater than either Sydney or Melbourne. Here we talk about the proportion of debt over six times one’s income. At the moment, in Australia it’s a little under a quarter of new mortgages, but it’s running over 50 per cent in New Zealand,” Masters said.
“One way to think about it is what you have seen in Auckland could be our worse case scenario. If New Zealand can weather that storm, then we can take some comfort that we can too. Their prices rose by much more and households are much more leveraged.”
Masters said she forecast the Australian housing market to fall 13 per cent peak-to-trough, taking prices back to April 2021.
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