House price crash

PHOTO: House price falls

The Reserve Bank predicts house prices could begin to drop as early as next year, and by about five per cent by 2024 as a “very modest” estimate.

But, Reserve Bank Governor Arian Orr noted on Breakfast the magnitude and timing of such a drop was highly uncertain.

What was more certain, though, was that the market was due for a correction, and that the increase on house prices seen recently were unsustainable, Orr said.

As people continued to “pile into” assets, like houses, that were “overvalued”, Orr warned there was “a risk on our hands”.

Reserve Bank Governor says restrictions working to curb NZ house prices

“We are concerned about financial stability,” he said of the Reserve Bank’s position.

When asked whether he felt pressure from the Government to help control runaway house prices, Orr emphasised it wasn’t directly part of the central bank’s remit.

“We stay focused on our purpose, and our purpose is the inflation and employment outlook…inflation pressures are rising globally, as well as here in New Zealand.

“Globally, the commodity prices, the supply chain…domestically as well because we have capacity constraints [labour shortages and supply shortages].”