Westpac expects household debt levels to keep increasing but falling interest rates will keep repayments affordable for the time being

Westpac's prediction above is for 2021, not this year.
By when do you see your prediction of "at least 25% drop in value" happen Kezza?

Bank predictions sure are all over the place. Aussie lead NZ on the way up b about 6-12 months. Will be interesting to see if that trend occurs in reverse.

The wealth transfers will be perpetuated as long as the reserve bank can push them, perhaps.

Kezza
Who is predicting Australian house prices by 40%????
If you are referring to the RBA then that your claim is utter rubbish. The RBA did stress tests - i.e. using a range of different scenarios - to see the effects of these on Australia banks.
The 40% was simply an extreme case test scenario and was quoted in a misleading newspaper article. For you to quote that gives you no credibility.
As a matter of interest RBNZ when estimating a 7% fall, did similar testings including a 40% worse case scenario, and Orr stated to suggest in anyway that it was likely would be irresponsible.

Kezza
"I'm still calling a drop of at least 25%."
In May you were predicting - sorry "guessing" as you put it - "30 to 50%".

This is oligopoly signaling of one bank to the others, it is the call that they should all collectively loosen their lending standards. When that happens we should believe the banks' forecasts, because their credit issuance is the key driver for house prices.

My understanding was in RBA bank stress tests they used housing declines of up to 40% and said that these were 'extreme but plausible'. This is not the same as predicting a 40% decline, I believe they estimated a 7% decline.

I think there's one thing we can all agree on - all we are doing is masking the pain, not treating the source of it.

I think part of the issue for the wildly divergent views is that there's still not been any clear signals of doom and gloom in the economy - well the latest lockdown knocked Auckland back a bit but that's still not very visible yet. What data there is is a little contradictory too - lots of people on mortgage deferrals of some sort, but that's not necessarily indicative of the sky about to fall, and the 2nd and 3rd tranches of the wage subsidy were taken up substantially less than the first tranche was. Not all that many people ended up going onto jobseeker benefit or the special COVID one, and many have already come off. Retail spending (before last lockdown) was something like 3-4% ahead of the same time last year.

I think if we had more clear signals of problems affecting the economy the optimistic scenarios wouldn't exist, but the expected evidence showing the economy is going to hell in a handbasket continues to be elusive.

It's a lot more complicated than that. There's no sane fundamentals that to support long term house price growth but if market sentiment remains and the world keeps making it easier to get credit house prices will continue to climb. How do we predict future market sentiment (it's not rational or educated)? and to work out ease of credit we have to model the rest of the world's economy and politics as well. This is not feasible.
You have to simplify this by making massive assumptions which is what everyone is doing. The Westpac economist does not know, he has a model that makes assumptions (probably including that there will be no more disruptive events before the end of next year) that outputs a number that allows him to produce a press release. Watch his number change if we go back to level 4 or have a (G)SIB bank fail.

Assuming banks are still applying a 7-8% interest rate for assessing repayment ability, people taking out mortgages now at these low interest rates should be able to afford an increase in rates.

The problem is while they might 'afford' it, the rest of the economy won't. Putting up rates just a little will suck out a lot of 'discretionary' money very quickly and likely in itself cause a recession, which political parties certainly don't want and probably the RBNZ doesn't either, despite our economic system practically relying on recessions to break up the 'business cycle' and clear out unproductive dead wood.

I think there's another crucial question bw, "WHEN will disaster strike?" the answer to this question, I suspect, is much further away than most (probably including you?) suspect.

The economist is aiming where his boss tells him to.

Develop a Profitable business delivering something customers cant be without, and little to no debt.

Confidence is massively important. Westpac is applying it thick and fast above to protect their bucks.

They make astrologers look good.

Like most listed companies, Westpac's performance is based on proportionate annual increases in profits for shareholders. Therefore, the only way they can do that is through credit growth. And if the cost of debt is lower, they need to lend greater amounts of moolah to meet their targets. Considering that up to 70% of their revenue comes from mortgages, they need to convince the great unwashed that it's 'business as usual' (even if the business environment points to the opposite). So that's why these media releases need to be taken with a grain of salt.

Westpac experts are talking about 2021 :

So may be that 8% rise is from end December as market may change soon from here on to low before rising.

This experts will keep changing the goal post so may be if the market changes in future after end of wage subsidy and stimulus -The Experts may again change in future so take it with a pinch........they too have to run their kitchen.

Wow.
One of two ATTACHED units with little land.

Yes. Plenty of people, including bank economists, seem to be underestimating the carnage to come...

Hopefully they are not, as a first necessity asset house prices need to be affordable to avoid social issues such as homelessness and inequality.

There's a pretty good chance people would live in those houses regardless of whether or not you purchased them. Unless you're actually building houses, or catering to a specific market like students, it's more likely than not that you are just preventing someone else from accessing home ownership.

They are out to create FOMO to build their stock price back up.