'Unsinkable': ASB predicts record-high house prices will just keep growing

House prices have gone up $300,000 in two years. Photo credit: Getty Images

Despite rapid price inflation and moves from the Government to rein it in, the housing market remains "unsinkable", according to one of the country's biggest banks.

In its latest economic forecast, ASB says it expects prices to rise another 10 percent in 2021, and 5 percent more in 2022 - well above Treasury's forecast of a drop to 0.9 percent growth next year. 

"We do expect to see house price growth slow this year," chief economist Nick Tuffley told Newshub. "We're expecting 10 percent growth over 2021 - admittedly that's because we had a lot of growth in the first few months of this year and we're anticipating prices would be relatively flat through the rest of this year."

Prices have skyrocketed lately, with different measures showing more than 20 percent year-on-year growth in the first few months of this year. The average price rose 8.9 percent in just three months to May according to Quotable Value, despite record-high construction and changes to tax rules. 

Tuffley says even ASB's forecasts might be "a little on the light side".

"It does look like the housing market is not exactly doing a Titanic, it's looking pretty unsinkable at the moment. While we do expect it will slow, it looks like it's been holding up quite well in recent months, notwithstanding the Government's changes. 

"We see an environment where house price growth does slow reasonably noticeably, but that house prices do hold up. In fact, we expect we'll see house price growth resuming next year. We see the housing market as weathering the storm of change fairly well, all things considered." 

The Government has said despite the unprecedented price rises - the average up $300,000 in just two years - it doesn't want them to fall, just grow more slowly.  

While ASB's predictions remain above Treasury's, they're down on the bank's February forecast, which was for 9.5 percent growth in 2022. 

"In the wake of the Government's tax changes that target investors, we expect house price growth to cool off much more rapidly than it was set to," the forecast reads. "But we don't envisage any price falls of any significance - the market's foundations remain solid."

A survey by ASB last month found a majority of Kiwis think prices will keep rising over the next year. Some economists have suggested prices won't stop rising until interest rates go up - which ASB is picking for May next year.