WELLINGTON (BLOOMBERG) – New Zealand house prices fell the most since the global financial crisis in the three months through July as soaring interest rates curbed buyer demand.

Prices fell 2.5 per cent, the biggest three-month decline since October 2008 when the economy was in the grip of the crisis-driven recession, CoreLogic New Zealand said on Wednesday (Aug 3).

Prices fell for a fourth consecutive month, easing 0.9 per cent from June, and rose 9.5 per cent from a year ago – the slowest annual increase since November 2020.

After surging last year amid record-low borrowing costs, property prices are now sliding as the Reserve Bank aggressively tightens monetary policy to tame inflation.

The central bank is expected to raise the official cash rate by another half-percentage point later this month, putting further upward pressure on home-loan interest rates.

“The combination of high prices following a significant upswing in values and increasing interest rates is restricting the number of buyers who are able, let alone willing, to borrow the sums required to buy property,” said CoreLogic NZ head of research Nick Goodall.

Other contributors to the downward pressure on prices include an increase in property listings in the past year that has switched pricing power towards buyers, while banks are also being more selective over how much low-deposit lending they will allow, CoreLogic said.

Housing affordability is unlikely to improve significantly while interest rates continue to increase, so the outlook for values in the rest of this year is likely to follow the pattern of the first half, Mr Goodall said.

The central bank in May projected an 8.1 per cent drop in house prices this year, while most bank economists forecast double-digit declines.