A period of stagnation is likely to happen for New Zealand’s housing market, with house prices expected to remain broadly flat over the next five years. According to Infometrics chief economist Brad Olsen, Kiwis may need to accept the fact that they cannot “bet the house on” tough capital gains.
During a Financial Services Council event, Olsen suggested that while price movements may experience “ups and downs,” the overall trend is likely to remain stable or see a slight increase in the coming years. For Olsen, “Slightly up is an important shift from previously when it was solidly up all the time.”
“I think we’re becoming a little bit more accustomed to the idea … people are looking at the housing market and going, ‘It’s not fundamentally what it was a decade ago or even five years ago,” he said.
He mentioned that while there may not be significantly more risk, the returns are expected to be less robust than in the past, a time when returns appeared to be almost guaranteed.
“You can’t bet the house on it anymore when you could before, and people did.”
Meanwhile, founder of Kernel Wealth, Dean Anderson, said the younger generation seemed much less interested in investment property.
“The attraction and appeal of investment properties and the returns are not there like they used to be,” Anderson noted.
“That’s a good thing. It’s healthy for New Zealand to wean itself off.”
He emphasised the need for increased productivity and investment in businesses and capital markets, “Hopefully we’re breaking the dependency on buying a property.”
Kelvin Davidson, the chief property economist at CoreLogic, expressed that the upcoming period may be more subdued due to ongoing affordability issues. He noted that debt-to-income ratios are expected to restrict house price growth in alignment with income levels, coupled with government efforts to increase housing supply.