ANZ's economists expect house prices to go sideways over the first half of this year.
In their first NZ Property Focus Report for 2024, ANZ economists Sharon Zollner, Andre Castaing and David Croy say forward market indicators of house prices remain soft, with elevated inventories and sluggish sales.
However they expect house prices to begin rising in the second half of the year as mortgage interest rates decline.
"This month we changed our OCR forecast," they say in their report.
"We now expect the RBNZ [Reserve Bank] to deliver a steady sequence of 25 basis points Official Cash Rate cuts starting in August."
"That timing is not a strong conviction call by any means, and we currently see the risks as roughly balanced on whether the RBNZ starts cutting earlier or later than that," they said.
"And one can't rule out a hike in February, though that isn't our forecast," the ANZ economists added.
They also believe the RBNZ's new Debt-to-Income (DTI) mortgage lending limits are unlikely to have much impact this year, while the associated loosening of loan-to-value ratio restrictions is likely to provide what they describe as "modest support" for house prices from the second half of this year.
"The extent of weakness across house prices and leading indicators has caused us to tweak our house price forecasts downwards," the economists said in the report.
"We now expect house price to stay flat over the first half of the year and finish the year with a 2% lift."
ANZ is New Zealand's biggest mortgage lender with more than $105 billion worth of exposure.
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51 Comments
Looks like they've got all their bases covered on interest rate predictions. And it took three of them to come up with it no less.
Patchy recovery - but recovery mode nonetheless.
TTP
Weren't ANZ predicting 7% house price increase a few months back? So what would they know.
You can call it a recovery when house prices increase faster than inflation. At the moment they are still going backwards in real terms.
I am on an interest only mortgage but I'm paying it down in real terms as well...
I laugh my head off when I see the words "real terms" I guess your mortgage is not going down in "real terms" either.
Yes it is even without paying it off. That's my point. My mortgage is not adjusted for inflation so only nominal house price growth should matter. Inflation is the friend of the leveraged asset owner, even if the high interest rates to counter it are not.
@JJ .....don't let facts get in the way of TTP's story ...let him have his moment in that Manuwatu summer sun :)
Translation: we have no idea what's going on.
Nearly all participants in this PPP (property ponzi party) "Circus" haven't got a handle on the fact, if they do put interest rates down, it actually means the OVERALL economy is not doing well, as the RB has reached the point of "extracting" as much money out the economy as possible and the only way to keep this "debt filled" economy going is more debt !
Many of us here have a far better predictive record than these so-called economics experts.
Hahaha....good one mouse.
We're not bound (hogtied?) by our masters that pay our salaries and bonuses.
Are you saying the bank economists have no professional integrity???
Their public pronouncements are there to first and foremost support their bank's profitability. I expect it is written into their contract that they cannot publish anything that would adversely impact their employer's interest.
I'm not sure what you mean about professional integrity.
Think of their professional integrity as being similar to the professional integrity of a defence lawyer towards their client.
Professional integrity means providing truthful, objective and unbiased views. Regardless of who the pay master is.
Sure, it can be a grey area. Just ask all the thousands of planning consultants etc out there who are consistently straddling that line between ‘expert’ and ‘advocate’ (and often straying into the latter)
re ... "Are you saying the bank economists have no professional integrity???"
No.
I'm saying biases can be both intentional and un-intentional. We all have them. And institutional bias, often called groupthink, is well documented.
For the good of the country, house prices need and probably will stay flat for 5+ years.
As usual, bank economists pedaling their own interests.
There are many reasons why staying flat for five years isn’t good for the economy, although would help FHB’s. Either way it’s not going to happen
re ... "There are many reasons why staying flat for five years isn’t good for the economy,"
Care to explain why you believe that?
I could quickly list many reasons why it would be exceptionally good for the economy, both at this time and for the next generation or two.
We now expect the RBNZ [Reserve Bank] to deliver a steady sequence of 25 basis points Official Cash Rate cuts starting in August."
I'm over the back pedalling and agenda pushing by various bank economists.
It may be later than that, and it may not be that steady. Putting significantly more money into peoples pockets via OCR decreases would still be very risky, especially when combined with a tax cut.
While we're in a per capita recession? Unlikely.
It'd take a year and more to flow through.
What typically happens when central banks start bringing rates down is that consumers (after expelling a collective sigh of relief) tend to save the extra, or pay down debt, for at least that long before sufficient confidence returns for them to start spending the extra disposable income. Those who have term deposits aren't tempted to spend up big either and tend to roll-over the TDs at lower rates (while missing the share market rallies).
Of course, that depends on how the RBNZ does it.
Massive cuts to restart the economy have an earlier effect inflationary effect to regular small ones where consumers and businesses really aren't sure when, or how big, the next cut will be. (The RBNZ, through their own foolishness, may be forced into the former. What they should be doing is the latter - and they should be doing OCR now! While saying they'll evaluate before there are any more (while we know they'll be coming with near certain regularity.))
I should add that now supply chains are largely (but not completely) back to normal - spending on imports that are not subject to NZ businesses' greed instincts and where product substitutions are abundant (i.e. there is real competition) - won't be inflationary. I.e. let them spend.
Sound like they don’t have a clue! I am picking its follow the FED other wise NZD will tumble even more. As for house prices I expect more losses as most of the population couldn’t afford to buy the place they are in right now.
Lack of supply (from owners not selling) is what I see as holding the market in position. Try buying a decent home in a decent suburb - there is not much about.
So as my own home goes to market I'm thinking maybe I'll get an okay price because there's not much competition - but on the flip side, what the heck will I be able to buy once I sell!
Quite a conundrum.
If you want to take a punt you could put the cash into a TD, earn interest that would probably pay for rent and some extra, then buy when / if more places come up for sale. But it could go either way...
After tax, term deposits are losing money in real terms.
Agreed, but much less money than houses are currently losing in real terms.
Not by much though, using 1 year advertised rates a PIE term deposit returns 4.4% after tax (28%) vs the last inflation figure of 4.7%.
But the recorded inflation rate is over the last 12 months, so you'll probably come out ahead given the recent declining trend in inflation.
I am seeing houses sell for low to mid ones that should be 300k to 500k lower. I'm out of touch obviously, but prices not going down
Not just the first half, I expect overall house prices in 2024 will be +/- 2% at most.
Translation: house prices will continue to fall in real terms again this year. No price recovery in sight.
Flat and then 2% rise. Inflation stubbornly high. Houses falling in real terms by ....?
I'd recommend taking care with such predictions.
The latest quarterly inflation figures have annual inflation running at about 2%.
Meanwhile the latest quarterly house price inflation has turned from deflation to inflation and is running about the same.
Using annual figures overstates both recent inflation and recent house price movements.
Using annual figures at this juncture is perhaps not the best way to evaluate the market.
Fair point.
Sideways is good. But if it is only because of excess inventory, then it will be short-lived, which is bad.
Hopefully by then Govt. policies to open up more affordable land supply and reduce consenting times etc. will allow for supply to meet demand, in developer real-time, so prices remain stable and increase only at the general rate of inflation, ie devoid of of speculative monopolistic rentier gain.
They are walking back the MDRS, so no, they will not be opening up more land or reducing consenting costs for more housing development where people want to live.
The MDRS was a poor way to implement density increases as it was breaking the council's social contract with its ratepayers in many communities, and that is why it is being rejected. And the council's infrastructure in many areas cannot cope with any increase in density so areas designated were largely a 'paper' exercise that wouldn't result in more houses built anyway, at least without great additional cost.
Plus many of the housing types are not what people want for their lifestyle choice if given the choice, but it is all they can afford, which is coming more and more at the expense of every other thing of importance, from saving for retirement, education, health costs, having kids etc.
And of course, unless it is tied in with less restrictive land use policies both up and out, then it cannot in theory, and certainly as not in practice, make housing more affordable on a like-for-like basis. And until it does that then there is the continual reductiveness trend where we will all be in very expensive Hong Kong caged housing.
Present Coalition policies are far more suited to increasing supply, just on land use theory alone, although they do still need some work.
But the biggest impediment to any policy is you need the trinity of correctly designed policy, correct methodology, and correct implementation all to happen, and in many cases, it has to all be 100% correct, otherwise, you get a result that is by a multiple far less, even to the point of zero success. Getting 90% of the way there will not get you anywhere near 90% of the benefit.
You cannot successfully leap a chasm in two steps.
"density so areas designated were largely a 'paper' exercise that wouldn't result in more houses built anyway, at least without great additional cost."
Unless it was compulsory to build medium density housing in the 'paper' areas, astute developers would do due diligence to see what contribution the 3Ws, electricity and telecoms would cost and either continue or walk away. Of course this pre-supposes Council, the electrical distribution company and the telecom company would supply this info.
That's my point, just because the paper plan says you can build x number of houses if the present infrastructure cannot handle anymore, and the upgrade cost is too dear, given that upgrading brownfields is usually more expensive than greenfields, and of course what the market requires are to amenity and price, then the real number that gets developed is far less than the paper number.
Thus this always results in an undersupply and never achieving the supply match needed to make prices as affordable as they should be.
Based on what you're saying, the Auckland Unitary Plan must have been a complete and utter failure. Can you comment on that, please, sir?
With the appropriate development contributions, additional rate payers, smart rules regarding servicing (i.e. rain storage tanks for stormwater attenuation, rainwater harvesting, pumped pressure sewer systems set to discharge only at off peak times (i.e. 3am), solar panels) - the densification is certainly possible and preferred to the urban sprawl alternative.
Yes density is possible, but the systems you mentioned like the STEP systems are not an integral part of the system, but these things are also just as applicable to housing in any density to get the best efficiency and environmental benefits, and which are normally easier and cheaper to install in greenfields developments.
The reasoning for intensification in the main part of NZ is to supposedly make housing more affordable, but there is no link between density and affordability on a like-for-like basis.
Density, at different levels, is preferable to different people, and the urban fringe, and beyond is preferred by more people than not. And without the freedom to go up and especially out, has a negative effect on prices all the way back into the centre. This land curve is the same in any City worldwide and is a well-documented part of land use economics.
Because we have a restrictive land use policy is the main reason our housing is some of the most unaffordable in the developed world.
It's not so much what density you prefer, but what you want/need to pay for it regardless.
"and the urban fringe, and beyond is preferred by more people than not"
I challenge this statement. The urban fringe is less preferred by more people than not and this is demonstrably true just by looking at land values. Why would people pay more for land and houses in the denser closer to the centre areas if they preferred the urban fringe. People go to the urban fringe because they are forced to due to lack of housing (predominantly medium density housing) close to the centre which is due to restrictions and barriers to density in these highly desirable areas.
Victoria recently did a comprehensive study on different development models. You should read it but I expect you'll dismiss it as ideologically driven ...
I've read extensively and been involved in development in NZ and overseas with developments of different densities.
Your justifying NZers having to pay nearly twice as much as many overseas jurisdictions at any density based on a jurisdiction that also has the same restrictive land use policies as NZ.
The point you miss,which is a basic land economic tenent, is the land curve slope is the same in any city in the world, ie dearer as you go into the city and the degree of that pricing in comparing one city to the next is determined by what the fringe land costs, which is determined by how restrictive the fringe is.
Many cities have more or less density at any location at prices far more affordable than NZ.
You can read from Adam Smith, Alan Evans, Alain Bertaud, NZ Productivity Commission into Housing, they all show this.
At any point in the price curve at any density, in NZ you are paying at least 1/3 more than is needed due to restrictive land use policies.
1. There are 000's of already consented buildings in the pipeline waiting for the maths to change before building can start. Council's won't be constraining this surge for a year or more.
2. No need for more greenfield land. Enough land exists in brownfield sites. (The NACTF will however pay back their supporter by allowing some greenfield areas to be developed. Alas, the hopes of untold riches from the owners won't come to fruition and many sites will remain undeveloped and land banked. Such a shame.)
So we are waiting for a non-existing surge.?
The maths of course which you are advocating for is higher house prices. Is this because of vested interest and/or ideology?
The math is: higher house prices + lower interest rates + lower construction cost inflation = potential viability
only the third of those aspects of the equation is remotely occurring
Residential construction will be a dead duck till at least mid to late 2025
Yes at the current status quo you are probably correct.
But this Govt. are meant to bring in changes especially to one factor that you did not mention and that is an increase in land supply and reduced consenting time and cost.
Part of this is via administrative effeciences and others with incentives to council to make this happen.
Their policies have promise but need some changes otherwise will be intercepted by bad faith actors, vested interests and bureaucratic capture.
Design, methodology and execution all need to be correct.
Or dead until 2030
you seem to have drunk the “cycle” coolaid.
Finally. About time they showed a bit more honesty.
But still hedging to an absurd degree.
... And into the rubbish bin it goes.
Predict the price goes up
Predict the price goes down
Predict the price goes sideways
And we change our tune around
We do the hokey pokey and
We twist our words around
That's what it's all about....
😂😂😂😂😂😂😂
Property's been fairly stagnant, but there's still areas with lots of potential that will see price appreciation. Even in downturns there's opportunity.
Tony Alexander is expecting Auckland house prices to pick up in the next couple of years because of increased migration and falling consent numbers.
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