BNZ's Chief Economist Mike Jones expects house prices to finish 2025 "broadly flat" for a third consecutive year.
"The NZ housing market spent most of this year in a broad state of balance," Jones wrote in the latest BNZ Property Pulse report.
"Ample supply absorbed an increase in demand and national house prices consequently shuffled sideways," said Jones.
"The past few months' worth of housing data - including last week's Real Estate Institute of New Zealand figures for October - has done little to disturb our thesis the national market remains in a broad state of balance," Jones said.
BNZ is New Zealand's fourth biggest home lender with total exposure of more than $63 billion as of June 30 this year.
Jones also noted that although lower mortgage interest rates helped to lift housing sales, this was matched by an ample supply of homes for sale.
"New listings growth has just kept its nose in front of sales growth, such that unsold inventory has continued to rise," he said.
"In fact, it hit fresh 10 year highs in October."
"That continues to nullify any pressure on house prices to rise and is in contrast to expectations the inventory overhang would be worked off this year," Jones said.
On the interest rate front, Jones wrote that a likely 25 basis point cut to the Official Cash Rate (OCR) on Wednesday would probably be the last rate cut in this cycle, although the risk of a further cut (taking the OCR to 2.00%) could not be ruled out if the economy fails to improve next year.
"Either way, the downward trend in retail interest rates appears to be nearing the finish line," Jones said.
"Declines [in mortgage rates] are expected to be concentrated more at the short term of the [interest rate] curve."
"Longer term rates like the five year, may be in the process of bottoming out around now," he said.
5 Comments
In 2026, house prices will resume a mild price appreciation of about 5% pa.
how can lending for housing increase at 5% PA without earnings also? Does incomes growing 5% mean 5% inflation?
How much higher would OCR need to be lifted to stop inflation?
5% house gains = 5% OCR = doom
Why?
So the same people who have forecast gains for the last 3 years have now admitted they have been wrong and see it as flat?
"That continues to nullify any pressure on house prices to rise and is in contrast to expectations the inventory overhang would be worked off this year," Jones said.
Going to need a lot more sales to work through the withdrawn overhang, the developer hidden overhang and the BAG HOLDER overhang (wanting to get out ahead of the other poor bag holders).
A 10 year high in unsold stock is not the hallmark of a balanced market
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