Westpac’s weekly economic commentary notes that New Zealand house prices are down 12% from their peak in November 2021, whereas sales are at their lowest level since 2011 (barring the 2020 lockdown).
Westpac also warns that “more than half of all mortgages will come up for re-fixing in the next twelve months, and many borrowers will face large increases in their debt servicing costs”. In turn, “the resulting squeeze on household finances will result in outright falls in household spending through 2023”.
The extent of mortgage tightening facing Kiwi borrowers was outlined in more detail in a separate Westpac report released a few weeks earlier. It showed that the ‘effective’ average mortgage rate that New Zealand borrowers are paying will roughly double in 2023 as these fixed rate mortgages are repriced:
“For example, a borrower who fixed their mortgage at 2.7% in 2020 will now face refixing at a rate over 6%”, according to Westpac.
In turn, Westpac forecasts “that nationwide house prices will fall by a further 10% over 2023 and 2024 combined. Coming on the back of the falls we’ve already seen, that will leave prices down 20% from their peak in 2021 (our previous forecast was a 15% fall)”.
Westpac’s house price forecast is similar to ANZ’s, which last week tipped a 22% decline from peak.
Both will be cold comfort to Prime Minister Jacinda Ardern, whose bid for reelection late next year will coincide with a record decline in house prices, severe mortgage stress, and an economy forecast to be in recession.
