The housing market is stagnant and the Reserve Bank is likely to raise interest rates twice more this year, according to ANZ New Zealand's economists.
"The housing market looks stagnant," they state in their latest New Zealand Property Focus Report.
"While house prices were stronger than we expected, sales were abnormally soft, listings continue to rise and days to sell are back near their 2022 peaks, especially in Auckland."
The report said that housing sales are normally soft in January as buyers, sellers and agents all take a Christmas/New Year break.
But January's sales this year were "abysmal" ANZ said.
According to the Real Estate Institute of New Zealand, 2995 residential properties were sold last month meaning January's sales at their second lowest level in at least 32 years.
Even after accounting for the usual post-Christmas lull, this year looked unusually soft, with the second weakest sales since 1992, only outdone by 2023, when house prices were falling," ANZ's economists said.
And the outlook is for the market to get worse.
"If it was just a one-off soft month for sales, we would put it down to noise, but that's not the case," the report said.
"House sales have been on a mild downwards trajectory since mid-2023, with the latest data just another piece of the puzzle. Over that time house prices have gone broadly sideways."
"Growing inventories are matching this story, as sellers see signs of a rising market, while buyers remain choosy. Inventories can remain disconnected from prices for a while, as sellers choose not to accept a lower price to secure a sale," ANZ's economists said.
"The same story is playing out in days to sell, especially in Auckland. Days to sell in Auckland are back near their 2022 peak, with the average home taking around 48 days to sell. The rest of the country is a touch more vibrant, but the trend here has turned too."
"High inventories and long times to sell houses can't last forever in an environment of soft sales because some homeowners always need to sell quickly," the report warns.
On top of that, ANZ's economists are expecting the Reserve Bank to lift the Official Cash Rate twice this year, to 6%, pushing mortgage costs up even further.
"We are expecting the Reserve Bank to lift the OCR two more times to combat increasingly stubborn domestic inflation," the report says.
"Homeowners should be conscious that mortgage rate cuts in the near future are not a sure-fire bet."
ANZ is New Zealand's biggest mortgage lender with more than $105 billion worth of exposure.
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