New Zealanders have been warned to prepare for a price shock as the housing market crashes again, with buyers and sellers still in limbo over the collapse of their local housing market.
Key points:The Bank of England has warned Auckland’s market will collapse in 2017The Canterbury earthquakes have raised concerns about the long-term sustainability of the Auckland regionAs the world economy continues to recover, there are fears about the sustainability of Auckland’s housing marketAs a result, many locals are scrambling to find a new homeIn the latest warning, the Bank of America Merrill Lynch economists warned Auckland may face a year-long housing price crash, with Auckland’s property market expected to crash between November and December of this year.
“The outlook for Auckland is less positive than that of the other NZ cities and it is anticipated that Auckland’s median price will fall by at least 40% in 2017,” the BAML said in its latest report on Auckland.
“While the current outlook remains favorable, Auckland’s long-run growth prospects are limited and may remain so.”
The warning comes just a month after the Canterbury earthquakes, which raised concerns of a long-lasting crisis in Auckland’s economy.
“New Zealand’s economy has shown resilience over recent months, and the Government’s policy measures have helped to prevent Auckland from entering a further recession,” the report said.
“However, the Auckland market is likely to experience further market volatility as the impact of the Canterbury Earthquake continues to be felt.”
While the impact from Canterbury’s quake was limited, the BIM said the Canterbury earthquake would have a lasting impact on the local housing markets, and that would have an impact on supply.
The Auckland region, which includes the capital Auckland and the surrounding North Shore, is one of the biggest market areas in New Zealand.
As of October 31, the city had a median house price of $1.1 million, according to the New Zealand Bureau of Statistics, up from $1 million a year earlier.
But this has been offset by the low value of the national median house, which dropped by more than 60% between January and March.
The BAMM warned that Auckland could see a steep drop in prices as prices begin to drop.
“If Auckland continues to experience significant price declines, it could experience a period of price stability or even an eventual sharp decline in house prices in the future,” it said.
New Zealanders were being urged to prepare by buying local, with the BPM reporting that prices in Auckland had fallen in the last six months by a total of $4,000.
“It is important that Aucklanders have the right information and skills in order to make informed decisions about whether to buy, sell or keep their existing properties, as well as how much to spend on a new one,” the bureau said.
The report noted that Auckland residents were being warned that if they did not buy their properties they could be charged a 30-year mortgage.
“In addition, there is a risk that if a home is sold, a new owner could be required to repay their previous loan, potentially affecting their financial wellbeing,” it warned.
The bureau said that while it had seen some strong activity in Auckland this year, there were concerns that the local market could start to slow down again in the coming years.
“Some of the recent positive trends may be temporary, but it is likely that further significant price drops will occur in Auckland over the next two years,” it added.
While it was the last warning to come out of the bureau, other forecasts suggest Auckland could enter another recession, with a report from the National Reserve Bank warning that prices could fall by 30% in 2020 and 30% by 2025.