We are about halfway through the current slump in house prices, according to the latest NZ Property Focus report from ANZ's economists.
"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," the report says.
"The 8% fall in house prices to date marks roughly the halfway point in our forecast for a 15% peak-to-trough decline."
However the report also notes that there are plenty of uncertainties around where the housing market could be headed from here. ANZ is New Zealand's biggest residential mortgage lender with more than $102 billion worth of home loan exposures as of June 30.
"On the downside, inflation may hold up longer than expected, forcing interest rates higher. But if this is accompanied by stronger than expected nominal wage growth, there will be an offset to borrowing capacity," ANZ says.
"That means the risk in that scenario would be that interest rates may need to go higher to achieve the required housing slowdown, rather 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," says ANZ.
"Even 8% off their peak, house prices remain highly vulnerable should we see a sharp rise in unemployment," the report says.
The report notes that ANZ's economists are still picking the Reserve Bank to make two more 50 basis point hikes to the Official Cash Rate this year, which would take it to 4% in November.
"Barring an unexpected shock, we see more upside risk to the OCR outlook than downside," it says.
"That leaves wholesale rates vulnerable to adjusting higher, taking mortgage rates with them."
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64 Comments
Good comments here, a touch of reality. Interest rates could stay higher for longer, a definite possibility.
And rising unemployment also appears to be a reasonable possibility in the next 12 months.
The odd thing is ANZ's overall predictions of certain elements of the housing market have been spot on - they were early and correct on inflation, interest rate rises, the impact it would have on confidence (FOMO turning to FOOP) and several other factors. Yet, they have consistently published laughably small house price falls.
Nov 2021 it was 3% by 2023
Feb 2022 it was 7% by 2023
May 2022 it was 11% by 2023
Aug 2022 its now15% by 2023
I am just wondering, if all those past predictions proved wrong, how likely the current prediction 15% drop being accurate? Or, how likely house prices kept dropping as predicted?
The 8% fall in house prices to date marks roughly the halfway point in our forecast for a 15% peak-to-trough decline.
Seems like a pretty timid correction.
TTP
TTP,
P.F.O?
"Seems like a pretty timid correction"
Tim, will you repeat the same statement to clients who were naive enough to use your services over the last 12 months?
Didn't get where that 8% comes from... but well... statistics and perspectives.
Anyways, regardless, yeh, on this one you are right. For now the correction is still timid/manageable, much better for FHBs to wait until there is a real one.
I did bet in -37% in real terms in 18 months from the peak... but I start feeling that it could go more than that.
I made that bet in December. I'll look to (maybe) buy an house in June/July 2023.
I am curious on checking how right I will be by then.
The direction is indisputable.
TTP is still here! That means the bottom is far from in. Like I've said for a while, when perma bull TTP has conceded defeat and no longer comments on this page, I'm going to wait a further 6 months before buying another property.
8%? HPI is down 10.8%?
so are they using median values?
does that mean they are forecasting a 22% drop in the HPI?
'ANZ, still see house price inflation staying positive for 2022'
This was ANZ's forecast commentary for the housing market on 1st December 2021.
They will probably get that forecast wrong by 25 to 30% by 1st December 2022.
Some credit due to Labour. At last some of the measures to check house-price inflation are beginning to bite . Takes some cheer out of property speculators riding on National's hopes of making a comeback and rolling back these.
So let me get this right, credit to Labour for wreck less money printing, and dropping the OCR too low for too long causing a massive housing bubble and skyrocketing inflation forcing higher interest. rates to unwind the bubble they created?
Credit to them for more than doubling house prices and then getting people excited by 10% house price decreases...
Ouch. This is too close to the bone.
So you haven’t noticed the winging and wailing about the interest deduction changes and bright line that Nat will wind back?
Every country wrecklessly printed money, every country dropped their OCR, every country is experiencing inflation. This isn't unique to Labour, pal.. At least they are doing something about it now, whereas National want to unwind these changes and keep the ponzi roaring along.
Because.... Labour created high inflation?...... which causes interest rates to rise.....which is the main reason for dropping house values!
Very cunning of Labour! Lol
Watch out for the collapse of Chinese property market, the rising fed funds rates, and the falling YEN. Oh and watch out for Ukraine
Labour smashed one half on the way up and smashed the other half on the way down.
The power of wishful thinking...
They're talking out of both sides of their face.
Publicly, it's mild falls. Meanwhile, their internal estimates already have a lot of home's down 25%. So they're limiting their lending while trying to talk up the market. Hyprocrites.
I still think house prices will reduce more in 2023 than in 2022, because of the proper recession hitting NZ next year
What does that mean for your million dollar view...any more trees to cut down?
nice view, but the motorway must be quite noisy there in St Mary's Bay. Lots of really nasty air pollutants too. Cutting the trees gives you more sunlight but also more nasty pollutants not filtered (at least a little) by the trees.
And pray like mad that a neighbour doesn't built a new six storey apartment building next door under the new planning rules.
Oh, the NIMBYs are out in full force there, trying to assert their authoritarian right to rule over what other people can do on their own land.
Thank you all for the kind, concerned and caring comments for my personal situation, much appreciated!
Haha. I did not know if you are someone who feels entitled to rule over what others can do on their own land, I just happen to personally know more of them and of the situation there.
But if it's a confession, just do your Hail Marys and you'll be fine. All manner of sins can be ignored when there's free absolution.
Like the bright guy who removed trees on the cliff only to find his property disappearing
Beach Haven cliff collapse: Council v home owner
https://www.nzherald.co.nz/business/beach-haven-cliff-collapse-non-cons…
Maybe he'll head down to the nursery for some reveg supplies? :-)
Tbh are you available to help stabilise that slope palmtree. You could get a great view from up there
"Nifty: What does that mean for your million dollar view"
Nothing, the view dosen't change when house prices go down
yeah, nah.
The recession will result in OCR cuts which will start offering some support for the housing market.
Only if inflation falls to 3%
RBNZs own forecast is for this to happen in 2024. So I'm sorry but there isn't going to be any rate reduction in 2023. The next step is unemployment rising which will put further pressure on house prices. Go back to 1988-1989 look at economic indicators. That is 2023-2024 rinse and repeat
OK, we'll see....
In my opinion our economy will be a mess by mid 2023, inflation will have died, and they'll need to cut the OCR.
I might be wrong, but I might also be right. Of course mine is a minority view.
Do you really place much store in the RBNZ and their forecasts? You don't think the RBNZ might be trying to influence through its rhetoric? That it may not be trying on jawboning?
The efforts engaged to get inflation to this point have been gargantuan. There is still a ton of money sloshing around the system currently, but ultimately, yes, threats of deflation similar to those existing through the 2010s will rear their head again.
HM, I agree you 100% if the RBNZ could act without influence.
However, the FED, Europe and China will reduce their options dramatically. Imagine your scenario but with the NZD 2% lower than it is now and under mounting pressure - would Orr destabilise the economy by dropping the OCR and crashing the NZD or let the housing correction continue?
They will all start cutting at about the same time. The world economy is tanking.
Isn't that what they want..."you will own nothing..."
One thing we should have learned by now is that RBNZ is gutless and will take the path of least resistance - hence I’m picking they will reduce interest rates to try and reignite the failing economic engine when it becomes apparent how steep the cliff we are driving off actually is - EVEN IF inflation targets are not met (which they won’t be because the productivity constraints are a birdsnest and a lot of demand is not easily removable eg highest inflation exists in the primary sector - which can’t easily stop buying inputs without reducing outputs) -RBNZ will probably call it a ‘temporary measure’ or a ‘transition’ of some kind - some variant on the ‘least worst’ rubbish they are so fond of these days.
It would be interesting to see a few car dealers go to the wall.
TTP
The 6th labour government has remarkable parallel to the 3rd labour government when it comes to economic mismanagement.
It's not over until Robertson and Woods have eaten all the pies (chomp chomp chomp)
2 legs good
4 legs bad
Animal farm.... Ah the irony
They introduced a proper pension scheme which Muldoon axed.
They’re quite the opposite. The third labour govt banished Muldoonism. The 6th have bought it back.
Current TM job listings are 27k (same as in March 22) and WINZ weekly report on main benefit numbers is still a flat line. The recession hasn't arrived yet.
Just the calm before the storm. Everything is slowing quickly.
Open homes are empty, new houses arent selling anymore, banks are being cagey with lending, everyone knows interest rates are up and most are reining in discretionery spend and saving for a rainy day.
It starts with one or two leveraged housing developers ... when their cashflow dries up. We are 1-2 months away at most.
I went to ANZ the other day to see a mortgage advisor. (I am with BNZ right now). Never got a call back, and the service was lousy. I found that interesting. Don’t need my business?
Didn’t sound like I would be any better off with their phoney mortgage rate discount for a Homestar rated home, anyway. So not bothered.
ANZ is New Zealand's largest and most exposed bank to the property market. And a non-event in Aussie.
Check this out: https://bankdashboard.rbnz.govt.nz/asset-quality
ANZ has seen a 10% increase in loans more than 90 days in arrears over March-June 2022. This is not yet a trend, and their balance looks fairly healthy still (only 0.4% of total lending either impaired or distressed). But ANZ will have a fairly good idea how this is going to change over the next couple of years as people roll off their previous low interest rates.
They talk spin, but as several commentators have noted, their talk probably doesn't match their actual beliefs.
Strong LVRs need only apply, as they seek to reduce their exposure, and please, won't another bank take their more risky mortgages!
I have an alert set for listings with keyword 'mortgagee' and this past week or so new listings have started to turn up more frequently and the listings still unsold are growing.
I've heard from the coalface that open home activity is picking up... good old TA is reporting the same. It'll be interesting to see what happens in spring.
That's not reflected in any of the data.
There's not exactly alot of data of what's happening on the ground eg. Open home attendances...
From my own experience, the attendance does appear to be picking up. It went from ghost town (i.e. just me) to a few groups coming and going in the open homes I've been at the last few weekends.
It'll be interesting to see if that results in more sales.
More demand... and less choices. I wonder what that means
Less choices? How so? My favourites in all the real estate apps are growing, and very few are registering as sold. Most are either still sitting there with the occasional downward price adjustment or updated with urgent sale required, while just a few are being quietly withdrawn.
Advertising on tm or seek is pointless
My employer (construction & housing industry) has implemented a recruitment freeze.
a sign of things to come or maybe we’re just in a unique situation in the industry.
I don’t know the discussions are at the top but from what I gather its due to increased costs of materials.
".....and continued progress towards eroding the housing deficit..."
The supply vs demand issue, or shortage of houses for a growing population.
"On the downside, inflation may hold up longer than expected, forcing interest rates higher. But if this is accompanied by stronger than expected nominal wage growth, there will be an offset to borrowing capacity"
Inflation leads to wage growth, and hence borrowing capacity.
“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually and then suddenly.”
The dialogue above is from Ernest Hemingway’s 1926 novel, The Sun Also Rises.
House prices dropping, combined with increased costs, then more insulation next year could lead to a perfect storm. We're keeping our powder dry for landbanking early 2023.
LWTF builders may be about to have a hard time for the first time in years.
And by then we should have a larger pool of potential staff.
Some amazing satire listening to Ashley Church try to convince everyone we are at the bottom now.....
The pain of spec capital gain eroding.
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