Report notes continuing upward pressures on interest rates
ANZ economists, in their latest NZ Property Focus report, said the nation is about halfway through the current slump in house prices.
Read more: NZ house prices finally take a dip from dizzying heights
ANZ is New Zealand’s biggest residential mortgage lender with more than $102 billion worth of home loan exposures as of June 30.
The ANZ economists said, “the housing market continues to shed momentum as the ridiculously high starting point gets a reality check from higher mortgage rates, the turn in buyer sentiment, and continued progress towards eroding the housing deficit,” interest.co.nz reported. “The 8% fall in house prices to date marks roughly the halfway point in our forecast for a 15% peak-to-trough decline.”
The report also noted, however, the numerous uncertainties around where the housing market could be headed from here.
Read next: What's pushing NZ house prices down?
“On the downside, inflation may hold up longer than expected, forcing interest rates higher,” ANZ said. “But if this is accompanied by stronger than expected nominal wage growth, there will be an offset to borrowing capacity. That means the risk in that scenario would be that interest rates may need to go higher to achieve the required housing slowdown, rather than greater downside risk to house prices. The risks around net migration feel skewed to the downside presently, a potential negative for housing demand. And hard landing risks for the broader economy remain highly pertinent. Even 8% off their peak, house prices remain highly vulnerable should we see a sharp rise in unemployment.”
The report said ANZ economists are expecting the Reserve Bank to raise the OCR by 50 basis points two more times this year, which would bring it to 4% in November, interest.co.nz reported.
“Barring an unexpected shock, we see more upside risk to the OCR outlook than downside. That leaves wholesale rates vulnerable to adjusting higher, taking mortgage rates with them,” ANZ said.
