Economists at one of New Zealand's largest mortgage lenders have predicted a flat to muted housing market for the next few years.
A new Westpac report out today has a gloomy national outlook for the housing sector.
The report, signed by the bank's chief economist Dominick Stephens and others, said: "We expect that house prices will be flat over 2017 as a whole and that we'll see only muted rises over the next few years."
Recent data from Harcourts showed the agency's city listings falling 25 per cent from last July to last month. Auckland auctions by Harcourts fell 56.9 per cent, property on hand rose 43.5 per cent, written sales fell 19 per cent and the average sale price increased only 1.2 per cent in the same period.
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Westpac said the housing market slowdown had been the sharpest in Auckland where prices were down 4 per cent since January, following "very large gains in recent years that eroded housing affordability and left house prices in our largest city significantly over valued on a number of metrics".
In the near term, there was a chance of a modest rebound in house price inflation after next month's election, the Westpac report said.
But the main driver of the house market slowdown was not about to change, the economists predicted.
"If anything, borrowing rates could push higher. For existing and prospective owner occupiers, this will weigh on housing affordability, which is already stretched in some parts of the country.
"For investors, increases in interest rates mean that the financial returns on housing assets - especially the potential capital gains - will look a lot less attractive over the next few years," the report said.