ANZ's economists revise their expectations of house prices falls to 22%

Property / news

ANZ's economists now believe house prices will decline by 22% from last year's peak before bottoming out in the third quarter next year

29th Nov 22, 11:19am by Greg Ninness

ANZ's economists have revised their forecasts of how much interest rates will rise by and how much house prices will fall.

Just a few weeks ago ANZ's economists were picking that the Official Cash Rate (OCR) would peak at 5.0% and that house prices would decline by 18% from last year's peak.

But in their final NZ Property Focus report for the year, they are now picking the OCR to peak at 5.75% and house prices to fall back by 22% from last year's peak.

However they have also conceded there is considerable uncertainty around where house prices will end up.

"The potential shock value associated with the accelerated pace of rate hikes present additional downside risks to the housing outlook that we cannot, with any confidence, incorporate into out forecast," their report says.

"The housing market will find a floor at some point.

"But there's a considerable amount of uncertainty around both the magnitude and duration of price declines that will play out before that floor is discovered."

The bank's economists estimate that the market is about half-way through the current house price correction and that prices will bottom out around the third quarter of next year.

ANZ is New Zealand's biggest residential mortgage lender with loans of $102 billion at September 30.

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64 Comments

by JJS | 29th Nov 22, 11:20am 1669674053

Aren't we at 18% already in the main centres? No doubt they will reforecast to 30% after a slow summer

by Miguel | 29th Nov 22, 12:57pm 1669679837

Agree, I suspect they are still underestimating. Bank economists and the RBNZ seem to have gone with the “boiling a frog” method of forecasting, slowly upping the amount prices will fall without causing panic. Every 3 months they up the prediction by amount that isn’t too alarming

Look at the RBNZ forecast between Aug and Nov MPS. They went from projecting steady GDP growth, peak OCR of 4% and unemployment peaking at 5% and translated this into house prices falling by 18%.

Come November and their projections show OCR going to 5.5%, 4 quarters of GDP contraction and unemployment peaking at 5.7% …. Yet somehow the projection for house price falls has gone from 18% to 20%

by Independent_Observer | 29th Nov 22, 1:17pm 1669681072

"While renting millennials might say they want house prices to fall 50% tomorrow, fact is, they would likely struggle to find a job if they did"

Doesn't really make that much sense to be honest -if millennials can't afford to buy a house because they've lost their job, it equally means they can't afford to pay rent...which means even more landlords will be defaulting on their mortgage obligations, which equals even more price declines in the housing market.

Can't have it both ways.

by Brock Landers | 29th Nov 22, 1:34pm 1669682045

These are old wives tales that vested interests like to share.

They are not necessarily grounded in reality.

by Flying high | 29th Nov 22, 9:13pm 1669709598

Actually my firends dad has his house 4 sale atm and 3 bidders are lining up. I do wish I was wone of thim. He is moving to a RV so he is hoping that it sells.

by morepork | 29th Nov 22, 1:31pm 1669681906

Nationwide it's down 12.5% from the peak based on REINZ HPI in nominal terms.

Banks don't want to scare potential borrowers as that would cost them money so I would take their forecasts with a grain of salt. They do need to increase their forecasts periodically to fit with the real data so that they are still at least mildly believable.

by chebbo | 29th Nov 22, 11:22am 1669674141

Just a few weeks ago ANZ's economists were picking that... house prices would decline by 18% from last year's peak

Well that didn't take long. 22% is even worse than the RBNZ's recently updated forecast.

How long until the next downward revision?

by Inthecentre | 29th Nov 22, 12:15pm 1669677333

It depends on how you look at it.

https://www.stuff.co.nz/business/money/300751714/anz-house-prices-will-…

In nominal terms, house prices would drop 22% but that would increase to 32% when adjusted for wage growth.

by realterms | 29th Nov 22, 1:49pm 1669682996

I find it interesting that they choose to report it this way. Tabloid-style scare tactics winning out over their traditional property spruiking. The worm must truly have turned.

by rumpole294 | 29th Nov 22, 3:24pm 1669688690

Chebbo - Same time it takes for conspiracy theory to become reality -about 3 months.

by blobbles | 29th Nov 22, 11:28am 1669674489

Remember >20% is a crash. We have already crashed in adjusted terms (HPI) in many centres, not far away from a crash in nominal terms. Once it has gone past crash territory, we are out into the unknown. 30-50% could be entirely on the cards.

by GV 27 | 29th Nov 22, 11:30am 1669674619

20% from where we are now feels sensible, but that's more than 20% since peak.

by IT GUY | 29th Nov 22, 11:40am 1669675220

We are seeing a very limited number sales about price 15-20% from peak now, we are still 15-20% above Dec 2019 levels (The pre covid water mark).

by rastus1 | 29th Nov 22, 11:30am 1669674637

The approaching drop/crash was limited to discussion on sites like int.co. It's now gone mainstream; the result will be buyers holding firm in the expectation it will be cheaper tomorrow. And s they should

Unless something arrives to put in a floor, this drop/crash will grow legs and march on and on and on....

by IT GUY | 29th Nov 22, 11:48am 1669675711

National reinstating interest deductability may slow people selling rentals, but I dont think it will bring many new buyers in. If you rang an agent today and wanted to list, by the time you have it on the market, it's very likely to be 2019 price levels and still very low sales rates. i don't think RBNZ are going to cut rates until CPI starts printing CPI 2s or 3s, structually that looks a long way off unless the entire economy crashes along with the housing market, A 3-5%GDP drop may give them cause to rethink things, even with CPI 3s 4s.

We are now at

Any landing you can walk away from is a good landing.

by Advisor | 29th Nov 22, 12:54pm 1669679641

That's right. Unlike what business lobbies, banks and property gurus want the NZ public to believe, solving the supply-demand imbalance facing our economy will require much more time, effort and pain than simply bringing planeloads of migrants here.

I am surprised Robertson and Orr are keen to keep their jobs for further terms despite knowing that the challenging times they faced during Covid will likely feel like a cakewalk compared to what's to come.

by Retired-Poppy | 29th Nov 22, 12:13pm 1669677189

Nice little disclaimer......

"The housing market will find a floor at some point"

Nice "safe" forecasting.....

by HouseMouse | 29th Nov 22, 11:52am 1669675955

ANZ should get a gong for the highest number of house price forecast revisions ever in a calendar year.

by HouseMouse | 29th Nov 22, 11:54am 1669676066

Glad that after more than one year ANZ have come around to my view - falls of circa 20%, bottoming out final quarter of 2023.

by chebbo | 29th Nov 22, 11:59am 1669676354

To be fair (and nothing personal), you've changed your view probably as often as ANZ have.

by HouseMouse | 29th Nov 22, 12:44pm 1669679090

Total rubbish!

What have I changed my views on? Certainly interest rates, I got that wrong last year and admitted it this year. ONE change of view on interest rates.

House prices? I have been very consistent, although acknowledge more downside risk than my original UNCHANGED prediction from last year of a total fall of 20% from peak to trough and a fall for this calendar year of 5-10% (and btw I caveated that by talking of scenarios, with a 10-15% fall very possible)

So, can you tell me what I have supposedly changed my view on so often????

by HouseMouse | 29th Nov 22, 12:47pm 1669679278

Further I called a bad year in 2023 for shares mid- late last year, and followed words with actions by selling shares and moving my KS funds to cash. I was correct, have not shifted my view even once, and am being rewarded.

by chebbo | 29th Nov 22, 1:59pm 1669683592

The problem is your predictions are so vague as to be almost meaningless:

a fall for this calendar year of 5-10% (and btw I caveated that by talking of scenarios, with a 10-15% fall very possible)

So basically anything between about 3-23% and you're going to be patting yourself on the back. It's almost impossible to be wrong. You're already qualifying your predictions retrospectively by using words like "circa" to claim that ANZ's prediction of 22% is equivalent to your 20%.

There's no need to get upset about it, though. Nobody has a crystal ball. Making predictions is a mug's game, which is why we talk in terms of risk. The future is uncertain, but at least risk is quantifiable.

by HouseMouse | 29th Nov 22, 2:04pm 1669683854

Why do you say between 3 and 23%?

I think you’ve totally misinterpreted/ misrepresented me.

I thought it was pretty clear. Last year I predicted;

- a central scenario of falls of 5-10% in 2022

- an almost as likely second scenario of between 10-15% in 2022

- an overall fall of around 20% from the peak in November 2022 to the trough in late 2023

by Independent_Observer | 29th Nov 22, 2:24pm 1669685080

Other than your OCR predictions I think you've been pretty good there HM forecast wise. More bearish than the banks when they though prices would be flat this year.

by rumpole294 | 29th Nov 22, 3:29pm 1669688955

I/O Banks predictions are more like what they would like to happen and so far have been consistently wrong and long will it continue.

by HouseMouse | 29th Nov 22, 4:18pm 1669691914

Thanks and I note lack of any evidence presented for me constantly chopping and changing my predictions.

Annoyed but will move on! :)

by Mr Ed | 29th Nov 22, 9:50pm 1669711814

No one cares. They are just pointless guesstimates on your part. Chebbo’s comments are correct

by HouseMouse | 29th Nov 22, 2:00pm 1669683630

I see your comment had lots of upticks, and you have not responded to my reply.

not that I will lose sleep over it, but I found your comment annoying and unfair.

But I am always open to a different view, so if you or anyone else (after all there were lots of upticks to your comment) would like to point out what I have changed my views on so regularly this year then that would be appreciated.

by HW2 | 29th Nov 22, 10:41pm 1669714908

Unemployment

Interest rates

by Brock Landers | 29th Nov 22, 11:58am 1669676328

Those with any sense of nous would cut out these bank economist middlemen and go directly to the scrolls.

History clearly shows how much hand wringing and endless revisionism could have been spared by paying heed to the message to start with.

Vested interests are doing their best to silence those who say things that cut too close to the bone. That's how you know there's some truth in there.

by Carinaz | 29th Nov 22, 11:59am 1669676358

Everyone be it RBNZ, Banks, Experts, Economist is changing the goal post but is not shifting to left or right but bringing forward towards the center as by even shifting the goal post are not able to hit. And this is not the end as who know in February OCR target may move to 6% and House fall prediction to 27% if not 30%.

Not many have been effected as are still sitting on low fixed interest.

It is wait and Watch

by Chaosinflesh | 29th Nov 22, 12:07pm 1669676836

I'm wondering how long till we see margin calls on the over-leveraged. Banks might say they don't mind if you're in negative equity if you can service your mortgage - but what happens when you can't.

Margin calls have a tendency to snowball.

If OCR goes to 6 or higher, I'm expecting an avalanche of cheap specuboxes that no one wants to buy on the market, and the resulting price crash is going to be epic.

by IT GUY | 29th Nov 22, 12:48pm 1669679293

If property falls in a non linear fashion (as it would with enough mortgagee sales) then flat bush shite boxes may well only attract speculative bids..... As FHBers will be able to afford mortgagee sales closer to the city.

As they saw in the US, once enough foreclosures happen no one pays normal prices , as you just have to wait a month and another load of foreclosures hit your desired suburb. Sure they had jingle mail and we don't, but by the time your house goes to mortgagee sale in NZ I suspect you have nothing left and a quick no asset bankruptcy will be the least of your problems.

by Juzz | 29th Nov 22, 11:59am 1669676390

Sorry a little off topic but is there any reason to use a mortgage broker if they're just going to put you into your own bank. Seems like they want a cut for doing SFA.

by Market Interest | 29th Nov 22, 12:05pm 1669676701

Yep, they'll get you a better rate. I don't know if they deal with different contacts at the banks than their customers get access to, but they seem to be able to hammer out a much better deal than you can on your own.

by Nifty1 | 29th Nov 22, 12:24pm 1669677850

What do you base this statement on? If you push the bank yourself, you can get similar results. Often a broker just directs you to take the 'online special fixed rate' as it's what they get offered as well...

If you have something outside the box, broker may be good... especially if they have influence in bank

by tyre_kicker | 29th Nov 22, 12:54pm 1669679692

Agree. I have always got better rate than 'online special fixed rate' dealing directly with bank. Booked in 2-year 6.09% yesterday

by Whatwillhappen | 29th Nov 22, 1:43pm 1669682580

3 banks offer 6.09% for 2 years, including BNZ and SBS. If you aren't with those ones then well done.

Kiwibank doesn't deal with brokers, so using one automatically cuts out one NZ-owned bank.

by morepork | 29th Nov 22, 1:35pm 1669682155

I don't know if I had a bad broker or whether it funnels through to their app/website, but the rates offered by my broker were the same as what I could select myself online, typically 0.1-0.15% below the carded rates.

by WestieAJ | 29th Nov 22, 12:02pm 1669676563

From the alternate reality of Wellington. Just the pre-work stage of the RNZ-TVNZ merger. The bill for 17 of the largest contracts for individual jobs is almost $4m. Most contracts are worth $5000-6000 a week. Conveniently the contracts mostly all end before Christmas. Maybe they have all been saving their lolly and they will all head overseas for their holidays to cause inflation somewhere else. Before returning in the New Year to pickup another gravy train ticket.

by DMC45 | 29th Nov 22, 12:24pm 1669677871

Anyone know what the average % house price increase from March 2020 to peak (Nov 2021) was? (I want to crunch some numbers). Thanks.

by bw | 29th Nov 22, 12:35pm 1669678503

Repeat after me:

"Property always goes up!" and the goodie, "It's time in the market that counts"

"The RBNZ is going to pivot, and mortgage rates are going to drop!"

"The immigration floodgates are going to be opened, and new demand will overwhelm the market!"

"Building a new property is only going to get more expensive. Replacement costs can't fall!"

Take your pick and add your own....but none of that matters. None of it.

Because the RBNZ is now doing what past Governments, of all persuasions, have failed to do - even as they all acknowledged the same problem in the run-up to their election. That, for all the reasons that matters, property prices are too high for the long term well-being and sustainability of the New Zealand economy.

The RBNZ know it. They don't want a Recession. But if that's what it takes, "there's one on the way" they are yelling. And this time, they are going to keep their foot on the throat of the Property Sector until it's been dead for quite some time. And only then, will they lift their Monetary Foot from the corpse; still with big interest rate stick at the ready.

by IT GUY | 29th Nov 22, 12:56pm 1669679793

Its quite possibly going to be one of the greatest opportunities to buy distressed real estate that NZ has ever seen, both for FHBers , Renters, and investors that saw this part of the cycle coming.

The cycle needs buyers at the bottom to form the base for the eventual recovery. Peoples expectations are very different to the GFC. We are about to see residential builders and smaller devleopers falling over, many smaller subbies will be taken out as larger players collapse. It always happens this way, history is no mystery.

by DMC45 | 29th Nov 22, 1:23pm 1669681390

Do you fish the Hinemaiaia IT guy? Random I know...

by IT GUY | 29th Nov 22, 6:58pm 1669701534

Yeah sometimes, but friends tell me the Hine is bad Juju, I was enjoying the Tong before the floods, love a stroll up the Waimarino or the Waiotak (damn creek keeps pulling me back for more pain)

I am scared of crosssing the TT but have always been up there after flow when it has colour

Keeping my eye on Turangi property, lots just sitting there, come back in a year I reckon, Plenty of time yet.

Getting into saltwater fly up here in the gulf at the moment.

by JamesM | 29th Nov 22, 11:03pm 1669716217

I think you will find a number of bigger residential development firms will also fall over. I'm watching DuVal & Williams Corp closely. I'd give their chances of survival less than 25%.

by Nzdan | 29th Nov 22, 11:53pm 1669719184

But I thought they offered 10% p.a. guaranteed?

by DTRH | 29th Nov 22, 12:56pm 1669679807

The bottom of this crash will arrive when average wages couples can afford to buy a home, so in Auckland still a long way to go.

by Fegus Woodward | 29th Nov 22, 2:34pm 1669685663

You keep saying this but it just isnt true - wealthy people will buy more houses meaning it is always above the "average wage" plus all the houses already owned i know a guy who has 50 - does he sell them for the average wage or does he hold and rent them like he has for the last 20 years?

by Brutus Iscariot | 29th Nov 22, 3:57pm 1669690668

With Covid part of the furniture, mortality will steadily increase for boomer retirees and their feudal property portfolios will be unwound.

by IT GUY | 29th Nov 22, 7:05pm 1669701944

No boomers kids will just keep them.

by DTRH | 29th Nov 22, 5:08pm 1669694904

You will see this the market will continue to crash, New Zealand is not Victorian society you can’t have 15% of population owning all the housing and renting them out like lords of yesteryear. We are already seeing social unrest up and down the country if the masses have no hope of being able to own a home things deteriorate very quickly. Most people over 35 could if they worked hard and saved could buy a house with price’s at 10 x times household income the young have no chance to get on the ladder, this is why youngsters are leaving for Australia, Fergus do you what a country of old farts just selling house to one another, who will look after you in that retirement village.

by smudge1 | 29th Nov 22, 2:00pm 1669683604

Add inflation at 7%+ and in real terms, the reduction is likely closer to 30%

by lekkerbydiesee | 29th Nov 22, 2:36pm 1669685806

I read this after looking at the latest global macro picture and I can't believe we are splitting hairs in NZ about 20 and 22% price drop. Given the global debt levels (higher now than debt crises that created GFC), geopolitics and the inequality now sparking riots in developing and developed countries like UK and South Korea, I reckon we are in some serious trouble regardless of where you live.

you see companies like Amazon paying minimum wage and sacking employees when they have a cancer diagnosis, while the owner is the planet's second richest man, it is apparent that our society has lost its way.

I foresee a global "let them eat cake" moment.

I do think NZ will hold together better than most, but I'm expecting my income to more than halve in 2023 (I'm self employed) and i believe we will all be wishing we only had a 50% drop in real estate from peak to trough.

by WellingtonInvestor | 29th Nov 22, 2:36pm 1669685813

One property expert said last year that any drop over 20% would be considered house price crash and he couldn't see it happening

How are these forecasters having to keep revising the figures?

by interesting1234 | 30th Nov 22, 11:39am 1669761542

No need to worry, when they're out of a job next year all they will have left to eat is their own words while they switch professions to something productive for the economy.

by Brutus Iscariot | 29th Nov 22, 3:23pm 1669688619

I'd chuck another 5% on there but otherwise in agreement - so a 30%+ drop in real terms by the end of next year. Also note that a drop in the national averages often understates what is happening under the surface. You just have to browse through homes.co.nz estimate values to see how far "off peak" we are now for people who really need to sell. Every week I'm seeing nicer and nicer houses dropping into my price range saved search on trademe. And way more asking prices/by negotiation sales. Winter next year could be a fertile bargain hunting ground.

by starrider | 29th Nov 22, 4:56pm 1669694170

What's the point of forecasting, when many areas have already dropped over 20% in real terms.

by IT GUY | 29th Nov 22, 7:07pm 1669702025

One of the best level forecasters of markets that I know has said , wake me up once the AVERAGE is -30%.

Biggest issue is none of these forecasters give a fundamental reason for their view

ie Debt to Income or Price to Income rationale for there original or constant 5% worse forecasts, they cannot as the fundamentals say 50% plus.

by Pagz | 29th Nov 22, 7:54pm 1669704889

While debate rages over % house price falls... did anyone notice Adern walking in with Klaus at the East Asia Summit?

by Mr Ed | 29th Nov 22, 9:36pm 1669710965

Lol 😂

by TuaWai Smith | 30th Nov 22, 3:52am 1669733540

22% is Good. Wouldn't hurt to go further to become realistic.

by brober30 | 30th Nov 22, 9:37pm 1669797478

I worry a perfect storm is coming. Cooling the economy is easier than reheating it, because people remember pain for longer. Add into that any global impacts from Americas war in Ukraine, or the CCP war against itself, and will be hard times ahead. We might even have to cancel our climate emergency if we find out what a real emergency is?