Treasury's prediction that annual house price growth will fall to just 0.9% in the coming year is looking less and less likely as the country rolls into another month of unrelenting housing demand and strong sales prices, says one real estate boss.
"House prices will undoubtedly move to more sustainable levels after an unexpected frenzy over the past 12 months. However, less than one percent in the next 12 months is a big call when buyer demand remains so strong, not to mention our borders and economy only opening wider," says Derryn Mayne, Owner of Century 21 New Zealand.
Announced on Budget Day, Treasury expects the Government's recent housing policies - including extending the bright-line tax test and removing of interest deductibility - will contribute to price growth falling from 17.3% in the June 2021 quarter to 0.9% by June 2022.
The Century 21 leader says the supposed dramatic flatlining of house prices will come at a time when the country reopens to tourists and migrants, higher population growth is forecast, and continued low interest rates are expected.
"We all know Treasury is conservative when it comes to economic predictions, but in reality, demand remains the driver here spurred along by the fact that New Zealand is still tens of thousands of houses short," says Ms Mayne.
She notes the Government's slowdown prediction came just a week after REINZ reported that April saw median house prices across New Zealand increase by 19.1%. What's more, nine out of 16 regions reached record median prices, including Auckland reaching $1,125,000 for the first time.
"We all expect the easing of house prices, but like REINZ we remain surprised at the very low level of nationwide price growth forecast out of Wellington. REINZ predicts it will be more around the 3% to 5% mark which sounds more likely.
"For sure the Government's tax changes and the re-introduction of LVRs are already starting to act as a handbrake. New Zealand's lack of housing supply, however, will ultimately prove the Treasury economists wrong. There's no way the coming 12 months in real estate will be lacklustre," says Derryn Mayne.