Infometrics chief executive Brad Olsen called the new forecasts “much more realistic”, while Cotality chief property economist Kelvin Davidson said the story common among Kiwis that house prices grew on average 6% a year over time could now be getting called into question.
“There’s a bigger story here that people are starting to question the long-run assumption that house prices always go up at 6% a year,” he said.
“It seems to be a story that’s coming through more and more.”
Finance Minister Nicola Willis (left) and Education Minister Erica Stanford. Photo / Michael Craig
Treasury’s quarterly numbers show prices going backwards in annual terms for two more quarters this year before turning positive in September.
Annual growth then climbs slowly, hitting 4% by mid-2027 and peaking at 4.6% in mid-2028 before easing back.
Six months ago, Treasury had been picking growth of 7% over the same period.
That subdued recovery rested on a number of key economic measures going right.
Treasury assumed net migration would nearly treble in a few years – going from 12,000 in the year to June 2025 to 40,000 by 2028.
It also assumed unemployment would peak at 5.5% in mid-2026 before falling, and that real wages would return to growth after going backwards during 2026.
Davidson said the typical view among property pundits was prices would remain subdued in the immediate future, while a moderate return to growth could be possible next year.
Olsen said Treasury’s new downgraded forecasts seemed to account for uncertainty around interest rates and the possibility they could rise.
He believed, however, that Treasury’s forecast of residential building investment climbing back to about $17.5 billion a year by 2030 – near the all-time record set during the low-interest rate Covid construction boom – was optimistic.
Ray White Group economist Atom Go Tian said first-home buyers had room to be optimistic.
They had benefited from stable house prices, while the Government’s incentive to get councils to approve more homes for construction in the coming years could help create more affordable choices for them to buy.
Tian said investors, on the other hand, should “pay attention” to a new levy on banks to help cover the Reserve Bank’s costs in overseeing them.
“In plain terms, the Government is charging banks for the cost of regulating them,” he said, adding that some of the levy might be passed through to investors in the form of higher mortgage rates.