ANZ's economists have adopted a slightly more optimistic tone in their latest Property Focus report.
They are now forecasting that house prices will fall by less than they previously expected.
"Housing data has come in a little stronger than expected of late," the report says.
"On the back of that, some falls in fixed mortgage rates and the proposed easing of high loan-to-valuation restrictions, we've revised up our forecast for house prices to an 18% fall from the November 2021 peak versus 22% previously.
"With prices already down around 16%, that means there is only around another 2% to go, with our forecasts assuming prices bottom out in June."
However the report points out that there are some uncertainties in its forecasts, with an 18% price fall based on the Official Cash Rate (OCR) peaking at 5.5% in May. ANZ is the country's biggest residential mortgage lender with total housing loans just shy of $103 billion as of December 31 last year.
"If the housing market proves much more resilient than this, the RBNZ [Reserve Bank] may conclude that they aren't quite getting the traction they need to bring inflation down, and the OCR may need to go higher.
"With CPI [consumers price index] inflation as high as it is, the RBNZ is unlikely to have a lot of tolerance for green shoots in housing, as that's likely to lead to higher consumer demand and CPI inflation than otherwise," ANZ's economists say.
"The good news is that first-quarter CPI inflation wasn't quite as high as the RBNZ's February forecast, so for now we think housing should get a free pass.
"Arguably, it just did, with the just-announced easing in high-LVR lending restrictions.
"Finally, it's important to note that downside risks haven't suddenly vanished just because we're taking a bit more upside signal from the timely data.
"House prices are notoriously uncertain - the 18% decline we have pencilled in represents what we see as the most likely of many plausible outcomes.
"Net migration is a key upside risk.
"A harder landing than anticipated in the labour market is key downside one," the report concluded.
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88 Comments
Oh dear. If the ANZ economists are as accurate as they normally are we're in for one hell of a crash.
Economists are usually wrong, sometimes by a lot.
The latest cpi picks show that
Bank economists the worst, ex Bank economists slightly better, comments from real people with skin in the game more accurate.
So it begins with a 16% drop and ends in a 2% trickle over the next few months? In what world will it play out like this?
I suggest it begins with a trickle, the 16% seen till now, and ends with a drop (??%) after the real pain kicks in later this year.
How is a drop in mortgage rates whilst inflation is still high is a positive thing. It just means that Orr is going to have to put the boot in (and raise the OCR) to force rates back up again to get the spend drop he needs.
Banks are too desperate to get people to borrow. Their best bet is come conservatism and to drop profit expectations whilst inflation is sorted out.
Well said that man.
These so called experts are paid employees of the industry and basically spin doctors employed to market for thier employee.
Like most spinners, is what they don't say that matters..
Forget inflation, immigration, loan rates, and all the data points the spin doctors manipulate and just look at the stock v demand v price drops v how long in the market for the area you want to buy in and make a real time determination about the timing.
So many still think that the system is there to look after them, the government is there to hold their hand and make sure everything is ok, when we are no different in many ways than back when we were hunter gatherers. Banks aren't there to safeguard your money, they are there to make money, period. Businesses are there to make a profit or they wouldn't be in business. Everything is out there to drain your money from you if they can, and although there is social expectations around regulation, it is the responsibility of each and every one of is to educate ourselves, prepare ourselves and realise that the world isn't built to ensure we have a fruitful life. After this is done, we make good of what we have and enjoy life how we can, but without complacency.
I suspect that is the reason behind the recent mortgage rate drops.
They need customers to keep paying the mortgage, rather than decide it's too expensive and sell, en masse.
Inflation is high, but already dropping, and would have dropped further if it wasn't for the weather events pumping a lot of claim money into the economy.
It's not so acceptable for shareholders to take a hit. It's supposed to be avoided by cutting staff and bleeding customers more instead.
The 16% so far is a drop, not just a trickle. House prices don't move quickly like shares. For example in the US housing crash during/after the GFC the biggest year over year fall recorded was 13%, it hit 14% here
less then previously expected...... after at least 3-4 changes in the predicted falls as they where all too small, I have to chuckle with this report.
Why do they even bother forecasting... they are wrong EVERY SINGLE TIME
They are so removed from mainstreet in their ivory towers with high salaries that they can't see the high cost of living struggle firsthand
But, the real explanation for these wildly optimistic forecasts is that they are in the business of selling households and businesses DEBT
They know it will reach the front page press, so like the RE sponsors of The Comb, they want people to buy their rose-tinted story, as they will benefit most from it
Frank doesn’t get The Comb reference?
Tony Alexander - A.K.A Tony the Comb
Known by the DGM mafia as Tony the Comb both for his hairdo and his hits - anyone that bought because of his grossly inaccurate 5% house price appreciation prediction for 2022, now has equity swimming with the fishes
And once a debt slave, you are easily controlled!
home lending is bread and butter for ANZ so a few soothing words are appropriate if any cracks are starting to show.
Yip. And Orr has had " Pre Election" Robby and Hippy in his ear.
Labour =" We know what is best for you™®" " we know how to spend your money"
Won’t help with the outrageous vendor expectations if they now think that the market is about to bounce bank in just a few months.
You will find that more homes will sell as buyers become realistic about value. Would you agree
House prices are notoriously uncertain - the 18% decline we have pencilled in represents what we see as the most likely of many plausible outcomes.
I see. Houses no longer double every 7-10 years like clockwork. They now behave more like the more speculative cryptocurrencies.
No wonder the sheeple are intuitively spooked when the narrative changes on the whims of what institutions feel needs to happen to protect their own skins.
Uses the word "sheeple"
Waiting for dollar cost averaging to put his digital arse-hats into the black.
Baaaaaa
Waiting for dollar cost averaging to put his digital arse-hats into the black.
Not sure what that means. Anyway, if you had DCA'd daily or weekly into ol' ratty from its all-time high, you'd be up approx 17% now.
And as the late, great, Sir Fredrick Dagg once said, "you can only fit so many sheep into one paddock"
TBNZ has relaxed the LVR rule, get a clue!
Call the ambulance the DGM's are choking on their coffee this morning. Prices of existing houses cannot keep going down when the cost of new builds keeps going up, driven by inflation.
Call the ambulance the DGM's are choking on their coffee this morning. Prices of existing houses cannot keep going down when the cost of new builds keeps going up, driven by inflation.
Old school DGMs know asset prices can turn on a dime. And not just south. Expectation of outcomes should not be overly simplistic as in your example.
And assuming DGMs are an inverse type of the 'house prices double every year' community is wrong-headed. Considering different scenarios is wise.
Lol - those bloody 'DGM's' telling FHBs not to buy when it looked liked we are at the peak with all those serious flashing red lights.
Appreciate in hindsight it was obviously going to fall and rates rise... and the young DGMs would suffer badly - but we should always say prices are on the up!! :) yeehaw!
Zwifter, this is incorrect as you are about to observe explanation follows....
Over half of the housing stock in Auckland is mainly land value ie 75-80 land 20-25 improvement value, old shitboxes...
The other half are quality homes, recent builds etc etc.... these are somewhat protected as the replacement cost is going up....
Back to the first 1/2, the value of these is either starter homes (they are cold draughty etc) or to remove them and build new, often 4-6 per site. While developers where paying 4000 per sq m for these the prices where high, but now developers are paying 2300 per s m... you see these sites, 50% of the market have no rebuild value, they need to be bowled and redeveloped. Much of Manurewa is in this camp. so if no one can afford to get financing and build there will be no bidders for 50% of the houses at the old elevated price. Sure there will be FHBers ... but they do not pay 4000 p s m or even 2300 normally
So its perfectly possible for house prices to fall even if buiolding supplies doubled. in fact they may fall faster as at that price no developement is possible and developers set the marginal high price per sq m of the land... which defines 80% of the sites value...
Many sites are worth more if the house is removed as doing so is an added cost for the developer.
Many developers refused to meat healthy home standards so did not rent these out while wanting for council approvals etc
You have to understand who can derieve value from the purchase thus is the marginal high bidder.
That’s an excellent dismissal of the tired old replacement cost argument used often by spruikers. You address the nuances well.
That’s an excellent dismissal of the tired old replacement cost argument used often by spruikers. You address the nuances well.
Sure is. Just throwing this kind of thinking into the DGM bucket misses the whole point.
100% Correct - not just Sth Akl sites either - happening in central suburbs like Epsom
Hit my inbox from an agent this week:
Barfoot & Thompson Ponsonby and Central Suburbs
Epsom
91 Pah Road – 846319 - Sold $1,790,000
868m2 site - Mixed Urban Housing Zone
https://www.barfoot.co.nz/property/residential/auckland-city/epsom/hous…
June 21 RV $2.775,000
July 17 RV $1,770,000
Mount Eden
8 Bellevue Road – 846131 - Passed In
2B Westminster Road – 846182 - Passed In
Sandringham
103 Lambeth Road – 846529 - Passed In
Remuera
12/16 Belmont Terrace – 846035 - Passed In
1B/463 Remuera Road – 844117 - Passed In
This totally biased forecast ignores all macroeconomic fundamentals this country is facing in the second half of this year. This is a report based on wants and desires, not actual forecasts. But they protect themselves by sneaking in, and I quote "Our advice: take anyone’s house price forecast with a grain of salt."
"Our advice: take anyone’s house price forecast with a grain of salt."
I think there is a correlation. The more explicit the disclaimer, the more likely it is that the content is little more than the comms team generating churn with the desired narrative directed from above. The narrative and reality are mutually exclusive.
Wait until your winter electrcity rates kick in.
Then there's winter food prices, fuel and your Gas/ LPG rises thanks to Jacinda.
Oh and the current immigration " for Aussie" junket will cost NZ big time.
What will they say next quarter when inflation hits 8-10%
Good point about winter prices. About to hit, just as many mortgage holders are refinancing at 6+ %.
plus the end of the fuel tax exemption in June.
Could be a nasty winter economy-wise
My prediction that 2023 would be an Anus Horiblis for Labour is coming true - buying more popcorn. Sure Grant with have some greasy excuse or blame someone else as its his stock on trade.
What will they say next quarter when inflation hits 8-10%
It's transitory ?
Quote copied from the bottom of this page.
"We can be blind to the obvious, and we are also blind to our blindness" ~ Daniel Kahneman
Too easy.
‘Net migration is a key upside risk’. Right now, it is.
But looking 6-12 months out it’s potentially a downside risk as the economy slumps. And even more so with the Aus citizenship changes and their economy looking more resilient than ours.
Yes it will be quality out sh*te in and NZ slips further down the economic hill.
House price’s will continue to fall when a bubble pops it will continue to deflate until average wage couples can purchase a home, probably another 20% down by this time next year.
Notice a tune change in all data and headlines? The bottom is nigh.
Not "all" data. This is the anti recession spin.
Just be patient and wait for the next OCR, winter price increases, etc..
Why trust these idiots now? I would favour the opposite of what they say and being more accurate.
The ANZ business confidence survey was generally awful.
Not ANY data….
"Notice a tune change in all data and headlines? The bottom is nigh"
We've had more than one "bottom" in recent times. Mainstream economic forecasting looks very "Mutant"
Here's my green shoot:
Having previously had no intention of buying, we are now considering buying
- in 12-18 months time
- if we haven't left the country by then
- and we can find a suitable house for roughly the same as our rent, in the same area.
At the moment, the mortgage on our rental is double our rent...
The green shoots are weeds... Maybe gorse!...' Look nice but watch the pricks!"
Sounds about right lol.
Just checked and a 25yr mortgage (with 20% deposit) on our rental would be just over 2x our rent.
Why on earth would we want to buy at these prices, in a market that is continuing to fall?
Even when we hit bottom there is close to zero chance of a bounce so you're not going to lose out. We'll track sideways or the Titanic will slowly start to float upwards.
All of this is just spin and hopium from the bank, while the data is showing price drops are continuing.
Just keep saving / investing the difference and it's a win either way.
Exactly. This is what all the spruikers conveniently ignore. In addition, to the mortgage payments, a new homeowner also has unavoidable weekly costs of approximately $200 for rates, insurance, maintenance and the like.
Its all part of the fun Monsieur. Its still much better owning your piece of paradise
What is this mortgage thing you speak of?
Haha. Kick out the landlord
Rising by the end of the year, good time to buy ...
Harvey W, if by chance you turn out to be right, what will this rise look like paired up with the prevailing inflation rate? Still falling when adjusted for inflation perhaps? Highly likely. When you look at rental returns, they are seriously lagging the current inflation rate as tenants are tapped out just like a growing number of mortgagors.
Just wondering if some more specifics (insight) with your predictions is warranted so that somebody can take them seriously?
Like your comment of getting your capital back plus a 6 percent return.
No rush though. It's won't bounce up in my opinion. It will settle and do a 1990s and be flat for at least 2 to 3 years. No need for yo-yos
What planet are you on Harvey W .....text a RE agent yesterday about a listing in the "city of sales" to ask what was the rent pw for a particular property (which hadn't sold at auction) and it was $875 .....so I text back and said, to buy at the CV price of this property, with a 20% deposit, just to cover the mortgage (P & I) with no insurances, rates, mtce etc I would need a weekly rental income of $2,500 !!! .....that is how "out of whack" this market STILL is.
So what are your reasons for a price increase, by the end of the year, apart from your "hopium" ?
TBH we're all basically guessing, but at some point (2024?) property will be rising at a rate equal to or greater than the CPI. The reason it's likely to be greater is that prices are significantly lower than replacement cost, who will build if they can't make money?
Agreed. At some point property will find the bottom and then rise along with wages. The bottom will be determined more or less how quickly wages rise in the near future.
Affordability index shows that wages and incomes are already up strongly. The one measure that went counter is interest rates and when that reverses, affordability improves. Only it won't improve. As the total outgoing seems to remain almost constant at 35 percent of gross income. That's my view of it, how about you
Correct. Wages vs servicing costs = house price direction. With how quickly interest rates rose over the past 2 years, it's not unreasonable to see house price falls, but give wages time to catch up and eventually you'll see prices slow. When that is, anyone's guess. Could be 2 years, could be 17 years.
But we're missing the other key ingredient which is supply vs demand.
Harvey W ....to quote in your post "TBH we're all basically guessing....."
Well, I am not guessing, I am communicating through this forum, what is happening on the ground, "right now, today" with REAL dollar figures to show .....nothing in my post was postulating or "guessing".
So the answer to my question is........ ???
I'm not talking about what has happened, but predicting what WILL happen, which is guessing like everyone else.
If someone is looking to buy, but waiting for prices to fall further, don't wait till 2024, the demand side of net migration is very real, more bodies in means less spare bedrooms nationally, regardless of who owns the bedrooms.
People that cry about how the predictions are always wrong are correct. I guarantee that everybody on these boards have made incorrect predictions that they've then revised and likely forgotten their original prediction.
If investing is about going against the tide, then the replies here would certainly indicate it's not a bad time to maybe get back in the market. Even TTP is circumspect these days!
The sky has not totally fallen on our heads. Predictions of 50% falls have not happened and seem very unlikely too happen.
I'd certainly not want to be selling at the moment but I think people that are rejecting buying out of hand, may look back in November and realise the market has shifted. Humans have a real ability to adapt and get on with things in life.
But I did just purchase after selling in January 22, so might be guilty of recency bias.
I agree. It’s *potentially* a good time to buy. But with a number of caveats
Great sign up.
Would your caveats number in two or three figures?
Haha
look, if you are a FHB and can afford to buy (the minority) and have high job security, then I think it’s worth looking. But you should be fussy and lowball offers.
Many including investors predicted prices to fall considerably when the Grey Swan of COVID happened. They didn't factor in the huge welfare injection the Reserve Bank provided to protect then stimulate the market, effectively turning property even more from an investment into a welfare scheme for those already in it.
The question then becomes, what might or can the RBNZ and a govt do to further protect and inflate the investment product so many of them are heavily invested in?
Never heard of the term ‘grey swan’, that’s a goodie.
something readily foreseeable (unlike a black swan) but of high impact, and when it would occur highly unpredictable ( so the big one in Wellington will be a grey swan when it strikes)
We have been looking to buy a house in the central Auckland area (Grey Lynn and surrounds) for the last 10 months after selling our house midway through last year. We went unconditional on a house in Grey Lynn a few weeks ago and we have just settled.
Here are my observations of our experience:
* House prices fell rapidly shortly after we sold midway through last year up until about October last year when there was a flurry of positivity that interest rates had peaked (largely driven by the usual suspects, TA and AC, as well as the RE industry). We noticed in October the increased activity in auction rooms and we also found ourselves in more multi-offer situations. We made an offer on a place in Grey Lynn which we really liked but it was rejected and we were dismissed almost out of hand. We pulled back from the market at this time as we thought that the return of positivity would be short-lived and we now know that that was the right decision as interest rates shortly thereafter went up at least another 100bps in response to higher and stickier than expected inflation. Shortly after those interest rate hikes, the market fell dead again, and for the first time in our search we noticed some evidence of panic amongst vendors and agents.
* We worked with a buyer's agent who helped us keep our ear to the ground on what was happening in real time. She was telling us that there had been a dramatic shift in activity levels post-October with far lower clearance rates, offers and with buyers materially resetting their price expectations downwards. The REINZ stats that have been released subsequently all support this. With little prospect of an imminent turnaround, we decided to wait until after the summer break to reassess things.
* By the time houses were being listed again post-summer, it felt as though the market had re-set itself at a much lower price point compared to October. Very few houses were selling at auction. We noticed more discounting by vendors. However, it was also clear that more people were attending open homes again and there was more activity generally. Our buyer's agent told us that, despite the increase in activity, most offers being received were still heavily conditional (usually subject to the sale of a house). The takeaway for us post-summer is that vendors were being much more realistic and willing to accept the lower prices. It's important to remember that the median price only reflects what a vendor is willing to take rather than expectations. This was and still is the key challenge for buyers in this market: finding a vendor who is willing to accept reality. We found this was much easier post-summer and we were starting to get good traction on our offers which were at being initially set at a level at least 25-30% below peak values.
* As I mentioned above, we made an offer on a house in October where we were dismissed "out of hand". We noticed that the house was relisted in March. Unknown to us, it had failed to sell last year. We made another offer on the house at a level which was 15% below our offer in October. After a bit of back and forth negotiation, we landed a deal - at a level around 12.5% below our offer in October.
* I have no idea what will happen to the market moving forward but these are my observations of the market in April:
1. Prices are materially lower than they were in November 2021 and interest rates are materially higher. Despite what some people may think, in my view (without giving financial advice!), these factors mean that the risk posed to a buyer today is materially lower than it was in November 2021. There are still risks, to be sure, including future value erosion and interest rates going higher and these risks should be factored into a purchase.
2. Activity in the last month or so is increased compared to late last year and earlier this year. I would say activity is currently at around the same levels as it was in October just before the 100bps rise in retail rates. Clearance rates are up, total stock levels are down, agents suggest that more offers are coming in and attendance at open homes is up. As a buyer with my ear to the ground, I can hand on heart say that there has been a very noticeable shift in activity in the market over the last month or so and this is primarily why we pulled the trigger and bought. Will this last and what will be the impact on prices? The answer to the first question is no one knows however I would say that we are unlikely to revert to the extremely low levels of activity we saw post-October last year unless interest rates move materially higher from here or there is some other shock to the economy (one or both of these events could of course happen). The answer to the second question is prices will (in my view) probably start to taper off absent any major interest rate shock or shock to the economy.
Interesting observations!
In terms of your last sentence, I suspect you may be correct in high value locations.
I suspect in mid and low value location there’s at least another 5% drop in prices to come.
I would agree with that and think that's a reasonable prediction given where things are at. We will see a much larger drop if we see inflation stickier and higher than expected or some major labour market shock but I don't think that's the base case given where we (likely) are in the interest rate cycle and given the (still) tight labour market. I have been bearish on property for a few years and it is still a (likely) terrible investment (especially in the big cities) if you are looking at the fundamentals - but, to anyone who is looking to buy a family home - I think that the equation is starting to make at least some sense.
If the ultimate goal is to buy a house, there is risk in buying that house but there is also risk in not buying that house (as anyone who didn't, but could have, bought a house in the 2010s would attest to). Late 2021, the risks were stacked towards buying that house but now I would say the risks are much more evenly balanced.
Just my 2c
Agree with all of this. We're based in Waterview and were looking from here into the city. There's not many decent family homes here but one came up and we grabbed it.
Definitely had the feeling that things were equalling out and if your buying to live in for a number of years it shouldn't really matter. They probably will still drop a bit and who knows how long till there's any real bounce back, but I think good houses will sell.
Very pleased to just be a bystander from here.
Interesting timeline, we are on the same timeline but I think 6 months behind ( I am in the regions) settlement prices have been dropping in low value properties for a while but we now have a large backlog of highly priced property ( some listed above 2021 values) that have been sitting for months. Feels like we are now close to seeing some lower settlements with these which should reset prices across the region. So I think we still have the bulk of the drop to come.
This sounds exactly like Nelson and Tasman districts from my monitoring since October 2022
That sounds about right. Regions tend to lag the larger markets by about 6 months
I presume this all references to your search local?...
Stock units are up in most areas.
Yes this is all in reference to our search in the AKL central area. Listings in AKL central have dropped from a high of about 3,200 a few months ago to about 2,800. This is by no means a large tightening in stock as most (if not all) of that drop is no doubt due to usual cyclical variations in stock level
Sorry to say it people but what did I tell you. I hope you haven't been listening to IT GUY shaft and aucklandpropertyrealitycheck rhetoric
Good summary and seemingly fairly balanced. Can confirm this is happening in the Wellington market. I work directly in the property space (not as an RE nor broker). First home buyers are coming back in force and banks are lending again. It does feel like a turning point. I think the chat of the relaxed lvrs and the expected peak of the interest rates could continue to fuel a fear of missing the turning point. But that said, it is very clear that the typical welllington city bungalow has dropped between $300 to $500k since the peak.
You’re dreaming. Not turning point yet…it’s months away. A blip and nothing else. Sit and wait fhb’s, it’s hardly started.
If they are right and I suspect that the government will make sure that they are, then FHBs should not waste their lives vainly waiting for houses to become affordable, and leave the country now and get on with their lives in economies that look after their citizens.
Why do they even come out with these 'predictions', as they are often more wrong than the RB. Predicating the weather is far more accurate.Higher interest rates IMO are the thing having the biggest effect on what people can afford to purchase a house for. We just have to look at Australia where they haven't raised rates as much and house prices seem to be on the rise again, driven by huge numbers of migrants coming in. It seems to be a migration led recovery. .
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