New Zealand house prices finally fall from dizzying heights

WELLINGTON, New Zealand (AP) — New Zealand house prices fell year-on-year for the first time in more than a decade, a report showed Thursday, as rising interest rates finally halted a dizzying boom that had only gained momentum after the coronavirus pandemic first hit.

The Real Estate Institute of New Zealand reported median prices fell 1.8% in July when compared with the same month last year. The decline was more pronounced in the biggest city of Auckland, where prices fell 5.6%, and in the capital, Wellington, where prices fell 5.9%.

Sales also declined by more than one-third. Up until its peak last November, the New Zealand property market had been among the frothiest in the world.

Already booming when COVID-19 first hit, the market surged as interest rates were cut to record lows and the government and central bank pumped money into the economy to keep it afloat.

Even with Thursday's modest decline, the average price of houses nationwide remained 810,000 New Zealand dollars ($517,000), putting them beyond the reach of many young people looking to buy their first home. In Auckland, the median price remained NZ$1.1 million.

The fall comes at a time that unemployment remains near record lows at 3.3%, but when economic growth has stalled and inflation has risen to 7.3%. Mortgage interest rates are hovering at around 5% to 6%, up from as low as 3% a year ago.

Brad Olsen, the principal economist at consultant company Infometrics, said that interest rates were the main factor behind the fall.

“You've got a lot of people out in the market who just aren't able to get the same finance that they were a year before because of how much interest rates have increased,” Olsen said. “The banks are being a bit more cautious given affordability challenges and not wanting people to...