Property

House prices to fall, rents to rise

House prices look set to continue falling, with Westpac predicting they could fall around 4.7%, while rents look set to rise.

Wednesday, July 28th 2010

In its latest economic overview released today, Westpac says although house prices have dropped 3% from the 2007 peak (dropping 12% when taking into consideration inflation decreases), they still have further to fall due to tax changes making property a less attractive investment.

It says tax changes will knock 14% off the fundamental value of residential property in the short term, but it only expects to see values decline by less than a third of that amount.

Impending tax changes, rising interest rates and slowing population growth "will reduce the fundamental value of houses, creating a renewed reason to expect ongoing price weakness," says Westpac.

Sales have been subdued this year, a solid indication that prices will continue to decline gently through to about September, Westpac says.

The bank sees more of the same over the next few years and is forecasting modest house price declines over the period ahead. Lower-end properties will be hardest hit, as landlords are most active in the cheaper parts of the market.

Westpac is also predicting rents will rise 7% relative to what they would have been without tax changes.

It says now landlords are receiving a smaller tax subsidy due to the removal of depreciation on buildings and increased GST costs make the maintenance and management of properties more expensive, they will pass on some of the increased costs to tenants.

Falling house prices and increased rents will also push up home ownership, relative to what would have occurred without tax changes, says Westpac, although it will take a number of years for these changes to work through.

The lone positive for house prices is the improving economy, which is set to flow on to better job prospects and job security. Westpac hopes better job prospects will "encourage more youngsters to fly the coop and enter the rental market - yet another reason to anticipate higher rents".

 

Most Read

Unity First Home Buyer special 4.29
SBS FirstHome Combo 4.29
Co-operative Bank - First Home Special 4.85
China Construction Bank 4.85
ICBC 4.85
TSB Special 4.89
Kiwibank Special 4.89
ASB Bank 4.89
SBS Bank Special 4.89
Westpac Special 4.89
BNZ - Std 4.89
Nelson Building Society 4.93
ICBC 4.95
SBS Bank Special 4.95
China Construction Bank 4.95
Wairarapa Building Society 4.95
TSB Special 4.95
ANZ Special 4.95
ASB Bank 4.95
Kainga Ora 4.95
Westpac Special 4.95
AIA - Go Home Loans 4.95
SBS Bank Special 5.39
Westpac Special 5.39
ICBC 5.39
Co-operative Bank - Owner Occ 5.59
BNZ - Std 5.59
BNZ - Classic 5.59
AIA - Go Home Loans 5.59
ASB Bank 5.59
Kainga Ora 5.69
Kiwibank Special 5.79
ANZ 5.79
SBS Construction lending for FHB 3.94
AIA - Back My Build 4.44
CFML 321 Loans 4.99
Co-operative Bank - Owner Occ 5.95
Co-operative Bank - Standard 5.95
Heartland Bank - Online 5.99
Pepper Money Prime 6.29
Kiwibank - Offset 6.35
Kiwibank 6.35
TSB Special 6.39
Kainga Ora 6.44

More Stories

Four decades of 6-7% yearly house price growth ending

Friday, March 21st 2025

Four decades of 6-7% yearly house price growth ending

New Zealander’s reliance on property capital gains in the mid-single digits is at an end.

[TMM Podcast] Yelsa serves up “marine reserve” of property buyers

Friday, January 31st 2025

[TMM Podcast] Yelsa serves up “marine reserve” of property buyers

It’s been years in the making and former real estate agent Mike Harvey is now coming to market with his platform matching buyers and sellers, an offering he says will be a gamechanger for the industry.

Leaving last year's stumbling housing market behind

Friday, January 17th 2025

Leaving last year's stumbling housing market behind

As interest rates ease and job losses climb, New Zealand’s housing market faces a mixed year of modest growth, with conflicting forces shaping the outlook for homebuyers and investors.

Don’t bet on house prices rising faster than incomes

Wednesday, January 15th 2025

Don’t bet on house prices rising faster than incomes

Former Reserve Bank Governor and National Party leader Don Brash says there are grounds for believing that house prices may finally have ended the three-decade period when they rose significantly faster than incomes.