House prices are facing headwinds from rising interest rates, election uncertainty and the potential for new taxes if there is a change of government, according to ANZ New Zealand's economists.
In their latest Property Focus report the economists say, of these, rising interest rates "are likely to be the most important headwind."
"The Reserve Bank hiked by 25 basis points in July and we think they will deliver hikes in the next two meetings to take the Official Cash Rate [OCR] to its neutral level of around 3%, before pausing to assess the incoming data," they say.
The Reserve Bank is scheduled to review the OCR on 2 September, 28 October and 9 December this year.
"[Financial] markets currently place around 50/50 odds on a follow up hike in October but one way or another have another full hike priced in by December."
The economists also note there is currently a less favourable environment for housing investors.
"Compared with mortgage rates, net rental yields remain relatively low by historical standards. That suggests that the cost of financing and owning a home is still high relative to the rental income it generates for investors," they say.
"Lending data indicate that demand from investors has weakened more sharply than demand from other buyers groups this year. This may reflect uncertainty about future tax settings alongside other market headwinds, including higher interest rates and low expectations for capital gains."
"More broadly, election uncertainty may be causing some buyers to delay purchasing decisions until the outlook becomes clearer," ANZ NZ's economists say.
ANZ NZ is the country's biggest home lender with total loans of more than $117.5 billion as of June 30.
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