Predictions house prices will stop going up rapidly 'UFO stuff' - Simon Bridges

Simon Bridges says anyone who thinks house prices will suddenly stop going up, as Treasury is predicting, might as well believe in UFOs.

Treasury on Wednesday forecast house prices would increase just 0.9 percent in 2022, a huge drop from 2021's expected figure of 17.3 percent. 

The figure was in its 2021 Budget Economic and Fiscal Update, and touted by Finance Minister Grant Robertson as a "very sharp adjustment in house prices, but a very necessary one".

Post-2022, Treasury expects values to keep rising, but nowhere near as quickly as they have in the past couple of years - from 2.1 percent in 2023 to 2.5 percent in 2025. 

Appearing on The AM Show on Friday, Labour MP David Parker said the 0.9 percent figure was down to the housing boom, with consents at their highest in nearly 40 years. 

"One of the reasons house price inflation is predicted to essentially disappear is we're building so many houses now in this country," he said.

"House markets are never linear - they get really, really frothy, and then they settle down. They've been really, really frothy, and now they're settling down."

Bridges, appearing with Parker, was as sceptical as The X-Files' Dana Scully.

"Do you believe in UFOs, David? I want you to keep talking because we're going to play this back to you in a year," he said.

"It's crazy talk. It's UFO stuff. We're not gonna see it. One of us is going to be wrong, but I look forward to seeing this tape played in about a year's time." 

Quotable Value, which recently said the average (mean) price of a house in New Zealand has surpassed $900,000, is also sceptical. 

"The average home value increased 8.9 percent nationally over the past three-month period," said general manager David Nagel. 

"While I expect that figure to start to drop, anecdotal evidence suggests it mightn't be a sudden one. The underlying cause of our housing crisis has always been supply. Until we sort that out, we'll continue to have upward pressure on prices as first-home buyers and investors compete for the limited available stock. 

"Though I expect to see less of the latter active in the market now, there's more than enough of the former to maintain that pressure in the short-to-medium term."

The Government in March announced investors would no longer be able to write off interest against their tax obligations, phased in over four years. When the UK implemented a similar change, house price growth was brought under control.

Others have said prices won't stop rising until interest rates go up

"Though most people would like to see property prices stabilise or even drop a little bit, nobody should want to see a long sharp drop," said Nagels. "The effect of our housing bubble popping could be catastrophic - not just for the wider economy at large, but for the lives of normal everyday New Zealanders everywhere."