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House prices will rise in 2012, run out of puff in 2013, Westpac says

Tuesday 27th March 2012

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House prices may rise 5% in 2012 before growth stalls next year because of rising interest rates and a boost in construction, says Westpac chief economist Dominick Stephens.

Relatively low mortgage rates are likely to underpin demand through this year though the rebuild of Christchurch will stoke inflation, spurring the Reserve Bank to raise interest rates starting in 2013, Stephens said.

Westpac expects zero increase in house prices in 2013 and a decline of 1 percent in each of 2014 and 2015. The Reserve Bank is expected to raise the official cash rate by 31 basis points from a record low 2.5 percent over the next 12 months, based on the Overnight Index Swap curve.

Auckland and Christchurch led price gains last year, reflecting shortages of housing. New Zealand’s largest city experienced significant under-building over the three-years ended June 2011, while the population increased by seven people for each new dwelling consent issued, Westpac said.

In the short term, prices in Auckland and Christchurch could rise more than the 5 percent Westpac is forecasting for the nation as a whole, only to underperform once the shortage in housing has abated.

In other regions, prices fell for most of 2011 and began rising at the end of the year.


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