Westpac economist Michael Gordon said the New Zealand housing market remained strong in June, but the pace of house price growth is starting to cool off relative to its white-hot pace at the start of this year.
Sales were broadly flat, while prices rose at a slower pace than in previous months.
Gordon was commenting on new data released by the Real Estate Institute of New Zealand. revealed national house prices rose less than one percent from May to June and sales volumes dropped 5 percent.
It also showed that showed May's median prices of NZ$817,500 rose only to NZ$820,000 in June, up just 0.3 percent.
Gordon estimates that June sales were down about one percent in seasonally adjusted terms. “Given the usual undercount on the first reading, that suggests they were probably flat for the month,” he said.
“Sales are still running above pre-Covid levels, and indeed they were still higher than in June last year, which marked the start of the post-lockdown rebound in activity," he added.
“The return of loan-to-value restrictions and the recent tax changes have contributed to some cooling-off of demand for investment properties, although the evidence to date suggests that homebuyers have been quite willing to step into the breach.
"That could change once mortgage rates – in particular the popular one- and two-year fixed rates – start to rise from their lows, as the prospect of official rate hikes comes onto the horizon.”
Westpac’s Imre Speizer said the New Zealand central bank on Wednesday is widely expected to keep the policy settings unchanged following a review.
However, he said the narrative should endorse current market pricing, which means market reaction is likely to be skewed in a hawkish direction.