ANZ Property Focus report predicts further falls in house prices this year, possible recovery next year

ANZ's economists expect house prices to continue to weaken this year before recovering in 2025.

"Subdued sales over recent months and rising listings on the market suggest weakness is likely to persist in the near term, with prices likely to correct further to clear the backlog of supply,"  the bank's economics team's latest Property Focus report says.

"The Real Estate Institute of New Zealand House Price Index fell 0.6% month-on-month in July, a slightly larger fall than we'd expected," the report said.

"With sales failing to keep pace with listings, recent downward momentum is likely to continue in the coming months, taking house prices lower. That said, there's been some important developments in recent weeks that make these data feel like ancient history," ANZ's economists say.

"After the Reserve Bank began its easing cycle with a 25 basis points cut in the OCR [Official Cash Rate] to 5.25% this month, and signalled there's more to come, risks to the outlook have shifted. Our base case is for the OCR to be cut steadily to 3.50% in the third quarter 2025."

"But despite mortgage rates having already fallen significantly and looking likely to remain on a downward trajectory for some time, a meaningful recovery in the housing market certainly isn't a given," the report says.

"After all, interest rates are falling earlier than expected because broad economic conditions have deteriorated more than anticipated (increasing the Reserve Bank's confidence that Consumers Price Index inflation will return sustainably to the 2% target midpoint). That's flowing through to a weakening labour market, with unemployment on the rise."

"And given the labour market lags the broader economy, that's set to continue for some time, potentially weighing on prospective home buyers' confidence to borrow and invest," the ANZ economists say.

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