Property market may slow sharply: Westpac

Monday 9 March 2020

Westpac's chief economist has warned the coronavirus outbreak could slow house price growth in the three months to June. 

The virus, which has led to more than 14 million people being quarantined worldwide, could slow down the "rampant" housing market in NZ, Dominick Stephens said. 

According to Stephens, house prices could end up "slowing sharply", as the effects of the virus take a hold on the NZ economy, impacting consumer confidence. 

Slowing house price growth could in turn impact consumer spending and NZ GDP, Stephens said in his latest weekly note. 

While house price growth is expected to slow in the near-term, Westpac economists believe the market will pick up later in the year, helped by lower mortgage rates.

Like many others, Westpac has revised its Official Cash Rate outlook for the year. It expects a cut later this month of 25 basis points, with a further 25 basis point cut in May. 

The bank does not expect the Reserve Bank to take radical action on rates like the US Fed, which made an emergency cut last week. 

"Markets are questioning whether the RBNZ might cut the OCR at an emergency meeting before March 25, or cut by 50bps on that date. We don’t regard either scenario as likely. The RBNZ’s
take on Covid-19 has sounded distinctly more moderate than other central banks."

The economists say the Reserve Bank does not view monetary policy as the best way to tackle the economic impacts of the Coronavirus. 

"Our interpretation is that the RBNZ is thinking hard about Coronavirus, but has concluded that monetary easing is not the most important response."

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