Milne’s house was meant to be sold in May via auction, a popular method of home sales in New Zealand, but not a single bidder showed up for the event.
“What we didn’t anticipate was that it would be so hard to market and sell our house,” said Milne, the 47-year-old managing editor of a news website. “We knew that every week that passed would knock another NZ$100,000 off the price.”
At the end of last month, they accepted an offer that Milne described as “dramatically” below the government valuation.
Economists expect New Zealand house prices will fall about 10% this year and may eventually drop as much as 20% from their late 2021 peak. While for many homeowners that’s a small decline compared with the massive equity gains in recent years, there likely will be broader effects. ANZ Bank forecasts subdued consumer spending due to a mixture of people feeling poorer because of falling house prices, the impact of higher rates on cash flow, as well as higher food and energy prices, according to Sharon Zollner, the bank’s New Zealand chief economist.
“There are going to be house buyers who have just entered the market in the last year or so who started off with a mortgage rate of 2.5% and all of a sudden they are rolling off on to a mortgage rate closer to 6%,” said Jarrod Kerr, chief economist at Kiwibank in Auckland. “There is going to be some pain for sure.” — Ainsley Thomson
CANADA
The housing market in Canada has turned so fast some buyers are losing money on their properties before the sales even close.
“People are actively trying to get out of deals,” said Mark Morris, a Toronto-based real estate lawyer who cited one example where a property’s assessed value came in C$200,000 ($155,000) less than the purchase price agreed to only a couple months before. That left the buyer willing to give up their C$100,000 deposit to avoid closing, he said. “I’m called several times a day by various people who feel that they’ve paid too much.”
Such cases are cropping up after Canada posted its first national home-price decline in two years in April, followed by another drop in May. Though so far the pain has been concentrated around the markets which saw the biggest pandemic runups — Toronto and its surrounding regions — the strains are already starting to spread to formerly hot markets around Vancouver too.
Like in other countries, the turmoil in Canada’s housing market is being caused by an aggressive campaign to raise interest rates by the central bank. The benchmark has already gone from 0.25% at the beginning of the year to 1.5% today. With even higher rates expected, some economists say home prices could fall as much as 20% in the hottest markets.
It’s a drastic change in a country that saw prices rise by more than 50% over the two years since the pandemic started. With prices rapidly outpacing wage growth, some buyers’ hope of entering the market came from low rates that are now jumping.