Property price plunge predictions ridiculous, says economist

Predictions of property prices falling 20-30pc are wrong, says BNZ's Tony Alexander. Photo / Janna Dixon

With the housing market seeming to have easily fended off the worst predictions of its fall, at least for now, the doomsayers have come in for some derision.

In his Weekly Overview commentary out today, BNZ chief economist Tony Alexander - emphasising the views were his own - was generally positive about the prospects for housing.

The housing market was recovering, although the upturn could not be strong for a while yet if at all this cycle, he said.

Dwelling sales had jumped and consents were now growing and he expected they would continue to do so for the next two to three years, particularly given New Zealand's housing shortage.

"And that is one reason we have so strongly argued against the silly forecasts from some wayward people of house prices falling 30-40 per cent in New Zealand," said Alexander.

"We have a supply-demand imbalance at current prices with insufficient dwellings."

He goes on to discuss, without naming, three "such wayward pundits", and advises to always ask, when listening to people promising riches or foretelling doom, what might be motivating their position.

Newspaper headlines are also questioned, with Alexander pointing out that negative sensationalism sells.

"It is hard-wired into us to pay more attention to things which may be bad for us than things which may be good."

Alexander is also scathing about measures of housing affordability.

"Keep in mind that they give zero insight into where house prices are going and are only really useful for voyeuristic commentary on the pain those on lower incomes might be experiencing to try to get into the housing market," he said.

- NZPA