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Long-term look at negative prices: Vestpac



Current low interest rates are likely to keep house prices rising in the near future, but rising rates from 2020 will lead to a market collapse, economists at Vestpac warned.

Thursday, November 15, 2018, 10:20 AM

Chief Economist Westpac Dominic Stephens, wrote in a monthly report Home Truths, said that the short-term outlook on prices was broadly positive, but added that the long-term picture was somewhat pink.

Stephens predicted that interest rates will grow rapidly at the beginning of next decade: "We remain convinced that the mortgage rates will increase significantly at the end of the year." At that moment, we expect the housing market to be seriously affected, however, with a reserve bank that is eager to keep OCR low For a while, this is more a story for 2020 than the current decade. We anticipate a fall in house prices in the early 2020s, "he said.

For now, Stephens expects continued growth as rates are reduced by record low. October's REINZ data showed an increase of 9.3%, which was seasonally adjusted by Westpac.

Stephens added: "Looking at the average of three months, it is clear that the rate of house price inflation has recently been raised. Acceleration comes from Auckland and Canterbury, which have shifted from a slight fall to the slightly rising house prices, and from Otago and Southland, where House prices are quick and quick. "

In addition to worrying about the inevitable increase in rates, Stephens said that government measures to hinder investor activity will have a long-term significant negative impact. Stephens said that REINZ's recent data showed "no evidence" of a foreign buyer's ban that has a direct impact, but said it would "have a lower house price at the end".

Stephens warned of further state policy measures, such as the introduction of capital gains tax, which would lead to a fall in long-term prices: "In the coming years, the market will be affected by changes in the rules on tax deductions for asset investors. And if a capital gains tax is imposed, the impact on house prices will be great. "

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