Market faces sharp correction risk
First NZ Capital has just released a New Zealand House Prices Strategy Update which estimates that house prices are over-valued by 30% to 40%.
The report acknowledges there are fundamental economic factors – including Auckland’s supply shortage and low interest rates - which have underpinned recent house price growth.
However, its analysis suggests the rapid recent growth in prices, especially in Auckland, has left them at a level where there is increased risk of a sharp correction.
In the report, First NZ Capital director of economics and strategy Chris Green used five house price valuation metrics to estimate that the average and median house price overvaluation is in the region of 30% to 40%.
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