ANZ reverses house price expectations, now expects an annual decline for 2024

Property / news

ANZ's economists expect the Reserve Bank to cut interest rates sooner rather than later but say house prices will remain weak for the time being

30th Jul 24, 1:14pm by Greg Ninness

ANZ's economists are downgrading their expectations for residential property prices this year, from a small rise to a decline.

In their latest NZ Property Focus report, the bank's economists downgrade their forecast of where house prices will end up this year, from a 1% annual increase for the year to a 1% decrease.

And they warn the risks to that forecast are on the downside, suggesting prices could slide even further.

However they are also expecting the Reserve Bank (RBNZ) to start cutting the Official Cash Rate (OCR), currently at 5.50%, earlier than expected, which should flow through to lower mortgage interest rates.

"Economic data releases relating not only to the housing market but also the broader economy have been surprisingly weak over the past month or two," ANZ's economists say.

"That significantly raises the odds that the RBNZ has done enough to tame consumers Price Index inflation and can therefore start easing monetary conditions sooner than previously expected."

"We have brought forward our expectation for the first OCR cut to November (previously February 2025) and would characterise risks as skewed to earlier than that."

But even with a cut to interest rates, the outlook for house prices remains subdued.

"Given there's still residual softness to flow through to the labour market, the subdued outlook for household incomes, job security, and accordingly, the appetite to borrow, is likely to contain any near-term resurgence in house prices," the report says.

"Accordingly, we’ve downgraded our near-term house price forecast, and now expect a 1% contraction in prices over 2024 (previous:+1%). However, it’s largely a timing story in so far as the weaker starting point means more scope for a recovery over 2025 as mortgage rates drop," ANZ says.

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48 Comments

by bw | 30th Jul 24, 1:32pm 1722303149

"more scope for a recovery over 2025"

There it is! The belief that nothing has changed. This is all just a blip on the way to more Capital Gains riches, and we'll all be back to reaping the benefits of higher property prices and more Debt in no time at all.

Which is why if the RBNZ has any sense it will drive the nail even further into the coffin of Debt driven speculation, as it now has the chance to do "Do it once. Do it properly"

by HouseMouse | 30th Jul 24, 1:43pm 1722303835

There’s quite likely to be some recovery later in ‘25, but a very mild one

by HGWR | 30th Jul 24, 2:06pm 1722305215

I'm not sure why there would be. Previous crashes have taken much longer than that to turn around. Currently we have a huge overhang, rapidly declining employment, aggressive investors locked out due to collapsed equity, and wiser investors capable of seeing that the investment won't stack up even if interest rates fall back to 5 percent. Who is going to be driving this recovery in 2025 and how?

by HouseMouse | 30th Jul 24, 3:29pm 1722310148

I said ‘very mild’ (maybe +2-3% over 6 months) from late 2025. Stimulated by an OCR circa 3%

yes unemployment will rise but if it rises to 6%, 94% of people who want to work are employed.

But you could be right of course

by Yvil | 30th Jul 24, 1:58pm 1722304711

"There it is! The belief that nothing has changed"

So you think "this time is different" BW? If so, why would it be?

by bw | 30th Jul 24, 2:12pm 1722305536

In a word - Demographics.

The Property Speculating generation is in the process of dying off/downsizing/cashing up. And the ones that follow won't have the capacity to buy from those that are the current holders.

Now we can try to keep things un-different, but the bulge in the demographic python started to pass through in 2011, when the first of them turned 65. We are just about to hit mid-python, and as every day passes, more will want to retrieve their savings from the asset markets where they are currently stored. That's both shares (think of what most do at 65 with their Kiwisavers for instance - cash them in) and.....investment property.

by IT GUY | 30th Jul 24, 2:14pm 1722305679

like this

https://www.news.com.au/finance/economy/world-economy/global-problem-hi…

by bw | 30th Jul 24, 2:42pm 1722307372

Quite.

But with one big difference. Japan got rich before it got old. We didn't. We just got indebted.

by interesting1234 | 30th Jul 24, 3:10pm 1722309046

They also have a culture with expectations of men working without rest, often still with poor views of womens capabilities and the stigma for women around having kids as they may not get much in the way of career opportunities after having a child, thus adding to the disincentive to have kids and keep pushing a career.

by Yvil | 30th Jul 24, 3:38pm 1722310737

Sorry, but no, not "Quite". The article's point is based upon the premise that "Japan’s population has slumped for the 15th year in a row". That is no the case in NZ, quite the opposite. Therefore you cannot come to the same conclusion.

by OldSkoolEconomics | 30th Jul 24, 4:58pm 1722315499

Our population is also in decline birthwise.

Plus we are losing skilled young kiwis to aus.

The numbers show growth because we import low skilled people and their families... but that's unsustainable and in the mid to long terms is a massive anchor on our economy and way of life. The growth is people that cant pay their way.. so every. One of us is having to pay a contribution annually for their pu lic services and infrastructure which is building every yr. It's not helpful at all.

by K.W. | 30th Jul 24, 11:33pm 1722339238

In the year to March 2024, there was a 14% reduction in the number of European births in NZ from 2023. Thats 14%, in just one year.

Also, 2024 was the first year where Asian births outnumbered Maori births.

by nightstalker | 31st Jul 24, 8:23am 1722371038

As an immigrant working in an industry with a majority of labour consisting of immigrants, I can assure you the majority of imports are qualified people earning way above the average income (2-3 times).

These people often work harder and longer and they pay taxes that go a long way to fund infrastructure and public services.

NZ is losing all sorts of skilled people to AUS, this includes many immigrants who obtained NZ citizenship. It's one of the reasons the wheels would come off pretty quickly if immigration is curbed significantly.

by Yvil | 30th Jul 24, 3:43pm 1722310987

BW, you state: "the bulge in the demographic python started to pass through in 2011, when the first of them turned 65" to explain why house prices will drop in the future. 2011 was 13 years ago... yet house prices have increased hugely since then. I think there were more people hoping to make money through property in 2021 than in 2011, and as soon as the numbers stack up again, i.e. interest rates drop, these people will buy again.

by 1689 Baptist | 30th Jul 24, 3:48pm 1722311325

The baby boomer effect is usually overstated and it completely washed over with a immigration policy.

by mja | 31st Jul 24, 12:55am 1722344144

Why would you expect retirees to sell their property assets that yield net rents?

Surely an investment property, with rent effectively tied to inflation is a great source of retirement income. Compared to shares and term deposits.

Assuming a retiree may live for another 30 years. I would not be sure, fraud or a market crash with bank failures has not delated a large chunk of my share or term deposit asset base by 2054. But, I would be pretty sure my residential rental properties would still exist, and be yielding inflation adjusted net rents.

by Black and White | 30th Jul 24, 9:41pm 1722332483

If you wanted to fix the housing Ponzi once and for all you would do something similar to our Australian friends.

1. 4.5% stamp duty

2. 7.5 % foreign buyers tax ( I would make this 10%)

3. And Capital gains tax

Thats how you stop your housing market been run like a Ponzi scheme.

The Leadership in our country is to weak for this plus looking after their own best interest and all their mates.

Imagine how much good you could do for the country with this sort of tax take.

Could sort out Policing,Health,Education and infrastructure in no time and get this country back on track.

Just follow the Aussie if we want to turn this country around.

All our young people are changing team very fast and you can't blame them.

And they know how to Win Olympic medals.

by CN - new | 30th Jul 24, 10:53pm 1722336810

If you wanted to fix the housing Ponzi once and for all you would do something similar to our Australian friends.

1. 4.5% stamp duty

2. 7.5 % foreign buyers tax ( I would make this 10%)

3. And Capital gains tax

Get the entry tax levels right to prioritise owner occupier buyers over non owner occupier buyers and non resident buyers in the existing residential real estate market (i.e not new builds) and there is no need for the capital gains tax (an exit tax is an incentive for existing owners to hold on and not sell - look at the example with the bright line test and the impact of the extension to 10 years, then reduction to 2 years).

Look at Singapore's approach to prioritise owner occupier buyers:

https://www.propertyguru.com.sg/property-guides/additional-buyers-stamp…

by CN - new | 30th Jul 24, 10:15pm 1722334537

Imagine applying Singapore's 20% or 30% stamp duty for a non owner occupier buyer to these purchase prices in the existing house market. It would make many non owner occupier buyers reluctant to outbid owner occupier buyers.

Trustee buyers are subject to a stamp duty of 65%.

https://m.facebook.com/story.php?id=100063631467052&story_fbid=10175979…

by starrider | 31st Jul 24, 12:05pm 1722384318

The more I think about the Singapore system the more it makes sense. It's almost as if Singapore has made rules which prioritizes the bulk of the population owning their own home. Imagine having just one of our political parties running on this plan.

Property investors number around 500,000 in nz. Which is only 10% of the population, yet all the financial rules and laws are fully geared to giving them a massive leg up over the other 90% of the population.

I believe that forcing property investors out of the existing home market, to build new, is the correct approach. With some incentives, like 30% rebates for materials exceeding building code requirements for insulation/double glazing or materials that have 50+ yr expected lifespans etc etc.

by sgtshortcut | 30th Jul 24, 10:19pm 1722334799

Australia has a housing crisis…they do lots of things well but I’m not sure about copying them on housing…compulsory super, we should definitely copy them there 👌

by Toye | 30th Jul 24, 1:34pm 1722303276

Oh surprise surprise.

by HouseMouse | 30th Jul 24, 1:42pm 1722303779

And of course previous to previous, they said +3 or 4% in 2024. Which was similar to my reckon.

I now reckon about -3% in ‘24

by HouseMouse | 30th Jul 24, 1:45pm 1722303904

Haven’t heard much from Shazza the past couple of months

by M0ralHazard | 30th Jul 24, 1:52pm 1722304325

Still licking her wounds after predicting two OCR rises?

by IT GUY | 30th Jul 24, 2:15pm 1722305721

Who is your daddy..........

ANZ become DGMers, its just a question of how deep the rabbit hole goes now.

by Retired-Poppy | 30th Jul 24, 3:37pm 1722310654

At this rate they'll announce their prediction of a -10% annual decline for 2024 - in December!

by rastus1 | 30th Jul 24, 1:49pm 1722304197

1%. You have got to be friggin kidding me.

Tui add or an add for spec savers?

Laughable

by K.W. | 30th Jul 24, 1:57pm 1722304631

LOL.

That's all I can say.

by morepork | 30th Jul 24, 1:59pm 1722304786

House prices are already down 2% YTD (REINZ HPI), so they're actual predicting a small rise over the rest of the year

by General Comment | 30th Jul 24, 2:15pm 1722305754

This time last year I predicted tomorrow was going to be sunny.

Last month, judging by the long range forecast, I decided it was more likely to be cloudy tomorrow.

Last week I checked Metservice and agreed with them there would be showers tomorrow.

Today I'm looking out the window and I think it's going to rain tomorrow.

Check back with me tomorrow, and I think you'll find my prediction of rain is correct, probably.

by ChrisOfNoFame | 30th Jul 24, 2:23pm 1722306185

Wow !!! Just Wow !!!

""Economic data releases relating not only to the housing market but also the broader economy have been surprisingly weak over the past month or two," ANZ's economists say.

What a way to admit they haven't a clue.

Staggering. (Almost as staggering as the RBNZ's.)

by Blackbeard | 30th Jul 24, 4:56pm 1722315381

The broader economy is weak because the people are mortgaged to the eyeballs. The banks suck em’ try. Imagine if house prices were at affordable levels. Our economy would be booming. No layoffs, no redundancies, less homeless, more families, happier people. But unfortunately, the NZ Governments haven’t had the foresight to manage our economy through policy and guidance. Total mismanagement. Now the banks own us and we are just blood bags to their share holders.

by ChrisOfNoFame | 31st Jul 24, 12:15pm 1722384925

It always saddens me that comments like yours completely overlook a major part of NZ's finances and instead want to blame the government for everything.

Once again I need to remind you - and everyone else that gave you a thumbs up or nodded in agreement - that the RESERVE BANK OF NEW ZEALAND operates independently of government. It is the RBNZ that also influences monetary policy by 'controlling' the cost of money and/or how much money is in the system.

But no. Again and again those that are ignorant of how the money supply is manipulated by the RBNZ want tp blame government.

Sheesh. Look up the Dunning-Kruger principle. Everyone thinks they know how NZ's finances are run. Very few actually do.

by Greeneggsandham | 30th Jul 24, 3:07pm 1722308825

The biggest lender of residential mortgages conceding there will be no growth is a worrying sign for the overall market. Those who called a bottom to the housing market might have been a bit premature. Even if rates are cut soon, the holding costs (rates, insurance, maintenance) are still climbing rapidly which makes substantial house price increases very hard to imagine any time soon.

by Nzdan | 30th Jul 24, 3:32pm 1722310379

Especially when you consider they'll likely be soft pedaling these negative announcements. By how much is anyone's guess?

If their whizz bang modeling system came up with a prediction of -5% to -10% will they really announce that?

by Greeneggsandham | 30th Jul 24, 4:58pm 1722315538

Never. It will spook the herd.

by M0ralHazard | 30th Jul 24, 3:40pm 1722310838

The bottom won't be until mid next year

by OldSkoolEconomics | 30th Jul 24, 5:01pm 1722315718

Late 2026 will bottom out.

Everyone wants to sell - hardly anyone wants to buy. Any increase in prices may be short lived

by Greeneggsandham | 30th Jul 24, 5:03pm 1722315799

Curious as to your rationale for that kind of timeframe?

by Squishy | 30th Jul 24, 3:21pm 1722309694

Would never have been allowed to happen under a Labour government.

by huttman | 30th Jul 24, 3:47pm 1722311263

I miss them. house prices always go boom under Labour

by OldSkoolEconomics | 30th Jul 24, 5:04pm 1722315858

Labour give money to everyone. They are like economic magicians and were so kind to everyone. It's so sad they left.

by wingman | 30th Jul 24, 5:38pm 1722317913

They sure did, socialists love spending other people's money.

Just think.....the dopey gun buyback, Pike River, the Harbour Bridge walkway, 3 Waters, the Light Rail fail, bike lanes, billions on maoris, 15,000 extra bureaucrats, I could go on, but that's a start. Boondoggles galore.

Your hard-earned tax dollars at work folks.

by ghytresd | 30th Jul 24, 9:55pm 1722333318

Presumably their tax dollars too..

by Zwifter | 31st Jul 24, 10:44am 1722379454

We can only hope that Labour will be out for at least two terms. The only downside is we will run out of sausage rolls.

by K.W. | 30th Jul 24, 11:37pm 1722339452

Labour was like "You get a free "warm and dry" house, and You get a free "warm and dry" house, Everyone gets a free "warm and dry" house. Jacinda Ardern really thought she was Oprah.

And Kainga Ora would have continued just hiding all the debt and cost blow outs and pretending everything was just fine. Until one day it wouldnt be.

by Adam B NZ | 30th Jul 24, 5:49pm 1722318591

Surprise surprise. Many of us on here said this would happen last year when the banks came out with their housing market price increase predictions for 2024. They all seemed to completely ignore what the lag effect of higher interest rates and cost of living would do on the market. Not to mention other factors.