Sir John Key reveals his prediction for the housing market

Sir John Key has a property prediction - and wannabe homeowners won't like it.    

On the back of his resignation from ANZ's board on Tuesday, the former prime minister told AM house prices could double in the next decade.   

He said migration, rising costs and higher salaries are to blame.  

New Zealand's annual inflation rate was 4.7 percent in the December quarter, down from its 2022 peak of 7.3 percent but still well above the Reserve Bank's target of between 1 and 3 percent.  

The central bank, due to make its first official cash rate decision of the year on Wednesday, has added 525 basis points to the baseline interest rate since the end of 2021 in a bid to bring inflation under control.  

Inflation and rising mortgage costs saw median house prices dip from their $925,000 peak in November 2021 to $760,000 in January this year, according to data from the Real Estate Institute of New Zealand

Despite this, CoreLogic has said housing affordability remained "stretched" across New Zealand. 

And the property cost decline appeared to be showing signs of rebounding, with CoreLogic's house price index up 2.1 percent for the quarter to January. 

In an interview with AM host Melissa Chan-Green, Sir John said he believed interest rates would start to come down next year.  

But the former prime minister said there was a problem: "Inflation's not gone."  

"If anything, interest rates stay higher this year - whether they go up or not is a different issue but, by next year, they go down," he said.

However, even with this period of high interest rates, Sir John said house prices could still "potentially" double in the next 10 years.  

"I know that... sounds nuts so that they'd double every 10 years because we have quite high house prices relative to others but, if you go away and look at it and say, 'OK - first of all, why would they go up?'  

"[New Zealand is a] small country, we have a population that's rising, net migration's pretty positive most years - so that adds to demand.  

"Then, internal migration, if you're living in Auckland or the big places that have growth... again, there's internal migration coming through."  

Sir John said general costs would also continue rising, contributing to increasing house prices.  

"Tell me what's going to be cheaper 10 years from now, will a plumber cost less? Will an electrician cost less?    

"If it's not double, it's more and don't forget people's wages go up every year - so their capacity to service a mortgage, believe it or not... is improving."  

Sir John's comments come amid increasing concern over domestic inflation. Analysts have said core inflation would remain for some time despite consumer price expectations continuing to fall.  

Independent economist Cameron Bagrie said on Tuesday New Zealand was "a long way away" from getting domestic inflation back within target range.