The OCR may need to go higher still
ANZ is now expecting house prices to slip 18% from their late 2021 peak – that’s up 3% from the bank’s 15% forecast last month.
Although predicting the housing market is “fraught with uncertainty,” it is “abundantly clear” prices would likely continue to decline considering the state of the global and domestic market, ANZ economists said in the bank’s monthly publication, Property Focus.
When adjusted for wage inflation, the figures become even more dire, amounting to a predicted property price fall of nearly 27% in real terms before prices rebound, 1News reported.
And while the figures signal a more precipitous drop in house prices than previously forecast, mortgage rates are also tipped to increase sharply.
According to ANZ analysts, the falling property values can be traced back to the high price of consumer goods driving up domestic inflation.
In a bid to combat inflation, the Reserve Bank of New Zealand is expected to hike the OCR once again by 5%. This is predicted to happen twice – once in November and again in February.
The banking giant warned that “the OCR may need to go higher still to prevent the wage-price spiral from developing further” – that is, if the government introduces another fiscal stimulus to the economic mix or “if the labour market fails to loosen soon,” 1News reported.
