Low population growth is underlying demand in the housing market, according to the Reserve Bank Te Pūtea Matua, which has again reiterated its concerns with runaway prices.
In comments prepared for a hearing of the Finance and Expenditure Committee, Governor Adrian Orr said today house prices were above a sustainable level, given the outlook for the supply of, and demand for, housing.
"The key drivers of housing supply and demand have turned around," he said.
"Underlying demand for housing had declined significantly due to low population growth since the outbreak of Covid-19 last year."
What effect this latest lockdown will have on the market was not cited specifically.
But Orr noted that at the same time as low population growth, house building was at record high levels and mortgage interest rates were rising.
"We expect house price inflation to moderate significantly in the period ahead. In our projections, house prices are assumed to eventually fall as momentum in the housing market fades," Orr said.
New Zealand's population grew by only 0.6 per cent in the June 2021 year, with 5.1m people, up only 32,400 annually, StatsNZ says.
The Reserve Bank looks set to introduce new debt-to-income lending ratios to try to take some heat out of the market.
The Herald last week reported Kiwibank economists saying that heat was "becoming unbearable" after new national house sale data emerged and the Reserve Bank was about to take a larger hose to it.
That move will undoubtedly be limiting amounts loaned by major trading banks to the riskier clients who are trying to load up with high debt levels to buy properties whose values they believe will continue only to rise.
Real Estate Institute data out on August 12 showed median prices rose 25.2 per cent annually, from $659,500 to a record $826,000 and Auckland house prices also set a record, up 28 per cent from $918,000 last July to $1,175,000 last month.
Kiwibank economists Jarrod Kerr, Jeremy Couchman and Mary Jo Vergara said there was now no doubt what was about to happen.
"The heat from the housing market is getting a little too hot to handle. The market just hasn't responded quick enough to recent policy changes targeting property investors. High-risk debt continues to build so financial stability concerns have pushed the Reserve Bank to act," the economists said.