BNZ's Chief Economist expects the housing market to remain flattish in the first half of this year then pick up in the second half

BNZ's Chief Economist Mike Jones has reduced his expectations of house price growth this year and expects a flattish first half.

"We expect about a 5% lift in house prices this year," Jones wrote in the latest BNZ Property Pulse report.

That's down from Jones' previous expectations of 7% price growth this year, published late last year.

"We don't see a lot of action over the first half," the latest BNZ report says.

"High mortgage rates and stretched affordability are restraining demand, essentially nullifying the demographic and policy tailwinds blowing in the market's favour."

"Against this backdrop, the market is struggling to absorb a flood of new listings," Jones says.

"Unsold inventory is at a seven year high."

However Jones expects the market to start to pick up in the second half of the year.

"We expect this chill in housing market activity to thaw as we move into the second half of the year," the report says.

"New home construction looks set to undershoot population requirements, and we'd also expect a boost to demand from likely lower mortgage rates. On the latter, the recent Reserve Bank meeting left us comfortable with our view for interest rates to go no higher and for cuts to begin later this year," says Jones.

The report also says the proposed introduction of debt-to-income restrictions is unlikely to impact the market too much, while an easing in loan-to-vale ratio restrictions and investors' tax changes are described as "mild supports" for the market.

BNZ is New Zealand's fourth biggest home lender with $58.4 billion of exposure.

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