BNZ's chief economist Mike Jones is expecting floating mortgage rates to hit 7% in the first half of next year, house prices to remain flat this year and possibly increase by 3% in 2027.
"Further increases in floating mortgage rates are very likely," Jones writes in the latest BNZ Property Pulse report.
"They're currently just over 6.00% following a round of post-Reserve Bank tweaks," Jones says.
"They're likely to end the year above 6.5%, with a push through to 7.0% in the first half of 2027 on the cards based on our view of steady Official Cash Rate adjustments from here."
However, the outlook for fixed interest rate rises appears more limited.
"Fixed mortgage rates haven't budged in response to the Reserve Bank's OCR adjustment," the report notes.
"That's of no surprise given the move was expected and pre-built into market pricing.
"So far this year, fixed rates have lifted between 20 basis points (five year) and 50 basis points (two year) as a tightening cycle has been progressively factored into market expectations," says Jones.
"This will naturally limit how much further fixed rates rise as that cycle is delivered upon. We nonetheless retain an upward bias for term mortgage rates," Jones says.
On the house price front Jones says prices are expected to end this year close to where they started and assumes a 3% gain next year.
"This renewed caution likely reflects a range of factors including hostilities in the Middle East, the associated stalling in the domestic economy, a still weak labour market, election and capital gains tax uncertainty, and, probably most importantly, rising mortgage rates," he says.
Jones also notes that the strong supply pipeline of new homes could also help to keep a lid on prices.
"Additional housing demand need not translate into higher house prices if it is met by additional supply. Listings remain plentiful and inventory continues to grind higher."
"Our overriding view is that a still chugging supply response will maintain the housing market in a broad state balance," says Jones.
"We're forecasting upswings in both population growth (demand) and residential construction (supply) over the next 12 months, the latter supported by the recent burst of consenting activity."
"It's unclear which side will dominate, but our forecasts have the growth rate of the supply side holding above that of population growth," Jones adds.
BNZ is New Zealand's fourth biggest housing lender with total exposure of $66.2 billion at March 31.
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13 Comments
maybe rise 3% next year
They couldn't help. After completely wrong predictions in 2023, 2024, 2025, 2026...
Well, they're predictions. No one can see in to the future.
That's why they should be careful in their wording. I was actually surprised to see they used the word "may". I've read too many articles in the past with titles like "How much will prices rise in 202x?". Also being a bank it's fair to expect they have a team of experts who can make an analysis of the market based on its influencing factors : number of listings, interest rates/OCR, migration levels, etc. Yet they chose to say what their vested interests dictate them.
PDK can. :)
Biased wishful unscientific predictions, labelled as 'forecasts'
We can decode this based on their previous “forecasts” as actually meaning:
- Flat = price falls this year
- 3% rise = flat next year
Even flat next year I have a doubt : there's a stock of 7/8 months in many areas, that already pushes us into 2027. Then the recent and possible future OCR increases will only begin to be felt in 2027 too.
Good point, I completely agree with you SND. I'm not claiming their decoded forecast is correct either.
Prices are going down
According to the vested interests cheer squads main supporters of Chris Luxon and Mike Hoskins on Newstalk ZB, the economic recovery is underway.
Backed up by the views of bank and independent economists which are trotted out daily, the message given out ( spin) is to look past the negative to flat housing market( crashing) but look at the " good news" : the price anydroyous milk fat solid content is rising. Whoa.!
Sure that may be lifting andthe farmers bottom line, but forvthe mug punter: Milk, meat, cheese, butter- the protein staples have risen on average 10%+ y to y.
So how can we be told of an economic recovery when we have in real time, the lowest productivity in the OECD and our unemployment is rising due to scare jobs, employers are not employing. Businesses are closing and wages going backwards. In real terms costs have risen and wages have gone backwards.
Please explain how a country can have an economic recovery under such economic circumstances. Epecially when tLuxon trumpeted 14% returning kiwis as being a positive sign of the recovery. But those returning are likely older kiwis, cashed up and setting up themselves up for retirement when the free money icks in at 65.
Those others returning would be the unskilled the dependent who found that lifestyle difficult in Australia. These are not our brightest and best returning, more than likely they will go straight on the benefit and vote left.
like green colored shoots?
returning are likely older kiwis, cashed up and setting up themselves up for retirement when the free money kicks in at 65
They have to have lived in NZ for 20 years, and, 5 of those years after the age of 50. Otherwise.... no pension. Aka if you have never lived here, and by implication, never paid tax here, you will get nadda. Good job. To boot if you get pension from and affitiate country (Aussie, Canada etc) what you receive from offshore will minimise what you get here dollar for dollar.
Speculating on age and stage of returnees has might have merit but stretching to their supposed skills and voting habits is some ZB level nonsense
I'd call this a 'sweet spot' - more new supply coming on; more older family homes needing to come on the market as folks retire and downsize - and investors do not seem to be interested in either.
A sweet spot.
Oh for this housing crisis to end. What a boost to young folks wanting to make a start in life.
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