New Zealand's housing market is softening, in line with the deterioration in the wider economic backdrop since the sharp rise in fuel prices, ANZ said in a report on Wednesday.
House prices fell in April across regions, while sales volumes also declined. Though the slowdown remains modest to date, the wider suite of indicators points to only slightly falling prices.
House prices in New Zealand have increased at an average pace of 6% per year since 1992. Higher fuel costs, rising interest rates, and elevated uncertainty are all set to keep the housing market subdued this year. The prices might increase more slowly in the coming decades than they have in the past, potentially at an average pace of around 4% per year.
The earlier high rate of house price growth was driven primarily by a long-running downward trend in interest rates, decent per capita income growth, and slow growth in housing supply. An average rate of 4% increase per year has been more typical internationally, and would broadly match income growth.
Sustained increases in wholesale interest rates could put upward pressure on mortgage rates.