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Waikato housing market insights with Kiwibank chief economist

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Waikato house prices are expected to stabilise over the next year or two, and home loan rates will start falling by the end of 2023, according to Kiwibank economist Jarrod Kerr.

Speaking at a recent event hosted by Waikato Real Estate, Kerr explained that global inflation had peaked and was declining, which would help bring New Zealand’s inflation under control. He says around half of the inflation experienced in New Zealand was coming from offshore, so it was essential to examine what was happening globally.

He added that domestic inflation was mainly driven by the cost of building houses, which had gone up by 20-30% in recent years.

The Waikato housing market is of great interest to Waikato Real Estate, a local and family-owned Property Management company led by Michelle Pearson.

Michelle Pearson

“We are managing a portfolio of over 1,200 properties in the greater Hamilton area, so working alongside our property owners to understand market conditions is key to their success and ours,” Michelle says.

During the discussion, Kerr also highlighted that there was a good chance New Zealand had already entered a technical recession. He pointed out that the fourth quarter of 2022 had seen a contraction of 0.6%, which could lead to two quarterly contractions, which technically means a recession.

He warned that the worst of the recession could still be yet to come, as the Reserve Bank of New Zealand and Treasury were forecasting a recession to begin in the middle of 2023.

Kerr also spoke about the outlook for builders and developers, who were facing high borrowing and material costs and high wages. He says the industry was likely to experience a massive ramp-up in construction followed by a significant slowdown, as has been the trend in New Zealand in the past. However, he added the Hawkes Bay rebuild, which was expected to begin soon, could slow down the process.

Increased regulation around owning rental properties was discussed. Kerr says the RBNZ’s introduction of Debt-to-Income rules, slated for April 2024, are a possible disruptor and something property investors should keep an eye on.

When asked by the audience what he would do if his mortgage was coming off a fixed rate. Jarrod pointed out that he cannot provide financial advice but can share what he does himself. Recently, he had a loan to re-fix and he opted to split up the loan and fixed for a short period only, feeling that interest rates will fall towards the end of the year.

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