Earlier this month, the Real Estate Institute of New Zealand (REINZ) released its House Price Index for August, which recorded the largest six month decline since records began in 1992.
Days later, CoreLogic released its interactive Mapping the Market tool, which showed that house prices fell across 84% of New Zealand suburbs in the three months to August.
Now Interest.co.nz’s David Chaston has published research calculating real inflation-adjusted house price declines across New Zealand.
The next chart plots house prices at the national level. The median house price fell 5.9% in the year to August 2022. However, because inflation ran hot, real house prices nationally fell a hefty 16.5%:
According to Chaston, “most of this impact has been since the start of 2022. Not only have house prices retreated since then, inflation has jumped to levels not seen in a generation or more”.
The price declines are even sharper across Auckland: New Zealand’s largest and most expensive city. There, house prices have fallen 8.3% in nominal terms since August 2021. However, in real inflation-adjusted terms, Auckland house prices are down 18.6% year-on-year, and a whopping 23.1% since November 2021:
By the time New Zealand’s house price bust has run its course, values will likely have fallen by around 30% or more in real inflation-adjusted terms.
The ball is in the RBNZ’s court, with the size of the losses hinging on whether it continues with aggressive interest rate hikes, or pauses before cutting rates sometime next year. Pass the popcorn.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also Chief Economist and co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
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