ANZ's economists have revised their forecast of how much they expect house prices to fall this year.
In their latest New Zealand Property Focus report, they say they now expect house prices to fall 11% this year, up from their previous forecast of a 10% fall.
However they have slightly softened their long term expectations on interest rate rises.
They now expect the Reserve Bank to increase the Official Cash Rate (OCR) by 50 basis points (0.5%) in July, up from their previous forecast of a 25 basis point rise, but continue to expect ongoing 25 basis point increases all the way through to February next year.
They continue to expect the Official Cash Rate to peak at 3.5% in the current cycle, but have brought forward the date by which they expect that to occur, from April next year to February.
"While the RBNZ's May Monetary Policy Statement and market pricing, is more consistent with yet another 50 pointer [rise] and a higher OCR peak [than 3.5%], we're expecting to see evidence by August that monetary tightening is gaining traction in terms of taming inflation," the report said.
"And if we're right about that, we think the RBNZ's assessment of spiralling inflation risks vs the risk of a hard landing in the economy will be looking more balanced than it does now.
"They'll still have a big job to do, with more hikes in store, but on balance we think the data will lead the RBNZ to re-evaluate the pace at which they need to tighten, reverting back to 25 basis point hikes from August onward.
"But it's all very much dependent on on how inflation pressures evolve, and at the moment, the RBNZ is right to focus on inflation risks and talk tough," the report said.
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49 Comments
I would think house prices have already fallen 11% this year.
Yes hard to tell if its 11% all up for the year, or another 11% on the falls that have already been reported? And its a 1% change to the previous forecast....they must have very accurate/precise forecasting methods!
The vague approach makes it easier to cover up announcing greater fall predictions I guess. 10 -> 11% doesn't sound significant if it were off the original starting point, but makes a more considerable difference if based off an already adjusted housing market.
_If_ the market has already fallen 10% from peak as some are suggesting, 11% would be an equal drop again, totaling 20% from peak to the end of 2022. I doubt a big bank would come out announcing this statistic.
Here is the link to the full ANZ report, you will find the answer to your question in it.
https://anz-singletrack.s3.ap-southeast-2.amazonaws.com/NZ_Property_Foc…
Access denied, could you quote the section please? Would be good to know.
Be greedy when others are fearful. There is a reason Buffett made this statement
People aren't fearful yet, they're still in denial.
Reality is beginning to strike, stats always lag so the trend is useful and its down so how steep & deep is a relevant question.
Do the banks take turns slowly pushing their OCR peak estimates higher and higher?
Are they worried about becoming discredited by not reporting the truth, which is it goes as high as is necessary to control inflation, while trying to soothe investors and speculators?
"Do the banks take turns slowly pushing their OCR peak estimates higher and higher?"
Yes, as a result of the RBNZ forecasting higher OCR ahead
Boy we do get a constant diet of house price forecasts from this bank. Maybe next update will be "anz expect house prices to rise by x percent (add your own guesstimate here)"
Reckless train driver predicts crash
lol yes, this is one forecast that will stick
What an ORRFUL prediction.
Maybe ANZ made a typo, and they meant to say that house prices would fall 11% this month.
All of these predictions continue to be readjusted to the downside. I have a feeling there will be more downside adjustments to come for NZ property given the current global economic and geo political environment.
Why do journalists keep asking bank economists for their opinions? The banks have a vested interest in house prices staying high and shooting the moon because that would increase their profits. A bank economist inspiring doom and gloom would be asked to leave by shareholders.
Not really because as house prices become detached from the incomes within the economy, the banks eventually run out of credit worthy customers.
So in the short run they may think high prices/high debt is a good thing, but they will have to learn the hard way that house prices need to moderate back towards historical price/income ratios in order to attract a sustainable level of credit worthy customers.
So true Wwh ......but unfortunately over 90% of the population wouldn't know the difference between a "bank" economist and a private consulting one ! ....for a small economy at the bottom of the world, so reliant on housing and extremely limited financial education, I am almost tending to believe that maybe the "bank" economist is actually working for the bank and RE Agents etc ??? ........but couldn't be, look at all those lovely "family friendly" ads. on the TV ....I always thought they had "our" best interests at heart :) ....NOT
Tony Alexander and Cameron Bagries both left BNZ & ANZ any dots worth joining?
Did Alexander leave on his own accord ?
Monty Python couldn’t improve on this farcical comedy.
And now my final offer Mrs Scum …
Where's our ol' mate TTP (taking the "proverbial") ....I thought he was going to pilot this plane to a "soft landing" at Palmy Airport ......seems to me those "crosswinds" are picking up strength.
Too Timid to Post
Don't worry, no matter how 'bad' the house price news, TTP can find a way to spin it.
Asset values are proportional to 1/interest rate
Implied asset index values with mortgage rate on the bottom (assumes a constant rental cashflow and ignores all other costs and taxes for simplicity)
1/(1%) = 100
1/(2%) = 50 - one year fixed mortgages bottomed close to here (housing peak)
1/(3%) = 33.3
1/(4%) = 25
1/(5%) = 20 - one year fixed mortgages are about here now once banks raise their rates this week.
1/(6%) = 16.7
etc
The implied asset value of a house (based on constant rental return, everything else being equal, ignoring taxes & other costs) has already fallen to 20/50, i.e. 60%, from the very peak (not that many people took out mortgages and rentals right at the peak)
An additional consideration would be that the cash flows being discounted (incomes or rents) would, in the long run, increase at or near the rate of inflation so would offset some of/the impact of the higher discount rates.
Whether that proves to be fact or fiction, I guess we will find out over the coming years. As it stands, increases in inflation and mortgage rates as a discount factor/denominator of cash flows, appear to rising far faster than incomes/rents which as you point out, is putting downside pressure on asset pricing.
They are clueless.
fundamental mismatch between their OCR guesses and their house price guesses.
Remember Ashley Church's rule
House prices halve every 10 years.....
Who ?
and
when ?
The fall in property prices is always patchy. Auckland and the other big centres will fall with the provinces usually on the coat tails. Within Auckland Herne Bay, and DGZ etc can be sticky on the way down while investor favourites, and apartments reliant on international students, immigration and tourism will drop like a stone.
11% has already happened in parts of the residential property market as demonstrated here yesterday with data posted by others. Without context the figure is not only biased due to its source, but useless to boot.
There is a mortgagee sale pending to test the Herne Bay stickiness. Purchased Feb 2021 for 3.5m. Bayleys looked like they were trying to shift it. No luck we can assume as now Barfoots have it as Mortgagee tender.
Mortgagee sales can be doubly problematic as it's acknowledged by valuers that in a generally falling market they will sell for less than if sold by other means.
The fact that they will return less to the owner, and may even cause the banks to lose equity (which the owner is still on the hook for), is less important to the bank than getting the bad debt off the books.
In many cases, it is also highlighting that a bank has other expected bad debts coming up, or even they are expecting the banking market to have increased bad debt, and are getting in first.
This of course feeds lower house prices into the general market so even those selling for other means will have to now compete with the price of these lower-priced mortgagee sales.
Had a look at that Herne Bay one WestieAJ .......would be "curious" to see what it actually goes for, purely for the fact as to how the market is stacking up right now ? .......but this is "nuzullin" and information of this kind is always closely guarded ......we don't want to frighten the sheeple !
a few on trademe be interesting to see results this next month
https://www.trademe.co.nz/a/property/residential/sale/auckland/manukau-…
Its all about luck and timing. The previous Herne Bay owners made 4x gain 2009 to 2021. Just comes down to where you are when the music stops. Did you even know the game you were playing? Still dancing around obliviously to the sound of silence while everyone else is scrambling for a seat.
Going off homes data mine is down 18% from Feb peak this year, could easily drop another 18% by end of the year and still be overpriced.
I am glad the tide is turning so level of debt people are going to be ensnared in as they enter the market will begin to drop
My townhouse in Wellington is down to 1.02 from about 1.22 acording to homes. Still comically overpriced for what it is.
Headline:
ANZ's economists now expecting a bigger fall in house prices
Yes they are, by 1% previously 10% now 11%. I'm not saying this prediction is correct or not, but is a further drop of 1% really worth to be the headline of the story?
A 10% increase in the forecasted fall percentage.
They are just covering their back everyone knows price’s have drop at least 11% already. By end of year it will be around 30% and will continue dropping till average wage couple can purchase.
The REINZ House Price Index (HPI) has been posting monthly declines since December 2021 (Figure 1, ANZ seasonal adjustment) and is now down 4.9% from its November 2021 peak.
So no, not "everyone knows price’s have drop at least 11% already"
You're telling me that paying
$600k for a 900sqm empty block 3 hours from the closest city was a mistake?
$1 million for an ex state house that was 200k only 8 years ago was a mistake?
$500k for a run down house in a town of 300 people was a mistake?
Who would have thought :P
Rubbing hands thinking how I am going to get bargain in Turangi for retirement fishing.....
Most people will try to time the bottom
I think most people will work with probabilities and accept they won't time the bottom, but will easily identify the fact there is a long way to go with very large additional discounts yet to be realised.
(Considering where we are with OCR and Inflation)
Buying a house now would be like playing poker, knowingly calling someones Straight Flush when you have a pair of 2's.
Madness to buy here, lets see how deep this goes for a couple of years.....
And maintaining security ?
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