ANZ's economists are downgrading their expectations for residential property prices this year, from a small rise to a decline.
In their latest NZ Property Focus report, the bank's economists downgrade their forecast of where house prices will end up this year, from a 1% annual increase for the year to a 1% decrease.
And they warn the risks to that forecast are on the downside, suggesting prices could slide even further.
However they are also expecting the Reserve Bank (RBNZ) to start cutting the Official Cash Rate (OCR), currently at 5.50%, earlier than expected, which should flow through to lower mortgage interest rates.
"Economic data releases relating not only to the housing market but also the broader economy have been surprisingly weak over the past month or two," ANZ's economists say.
"That significantly raises the odds that the RBNZ has done enough to tame consumers Price Index inflation and can therefore start easing monetary conditions sooner than previously expected."
"We have brought forward our expectation for the first OCR cut to November (previously February 2025) and would characterise risks as skewed to earlier than that."
But even with a cut to interest rates, the outlook for house prices remains subdued.
"Given there's still residual softness to flow through to the labour market, the subdued outlook for household incomes, job security, and accordingly, the appetite to borrow, is likely to contain any near-term resurgence in house prices," the report says.
"Accordingly, we’ve downgraded our near-term house price forecast, and now expect a 1% contraction in prices over 2024 (previous:+1%). However, it’s largely a timing story in so far as the weaker starting point means more scope for a recovery over 2025 as mortgage rates drop," ANZ says.
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48 Comments
"more scope for a recovery over 2025"
There it is! The belief that nothing has changed. This is all just a blip on the way to more Capital Gains riches, and we'll all be back to reaping the benefits of higher property prices and more Debt in no time at all.
Which is why if the RBNZ has any sense it will drive the nail even further into the coffin of Debt driven speculation, as it now has the chance to do "Do it once. Do it properly"
I'm not sure why there would be. Previous crashes have taken much longer than that to turn around. Currently we have a huge overhang, rapidly declining employment, aggressive investors locked out due to collapsed equity, and wiser investors capable of seeing that the investment won't stack up even if interest rates fall back to 5 percent. Who is going to be driving this recovery in 2025 and how?
In a word - Demographics.
The Property Speculating generation is in the process of dying off/downsizing/cashing up. And the ones that follow won't have the capacity to buy from those that are the current holders.
Now we can try to keep things un-different, but the bulge in the demographic python started to pass through in 2011, when the first of them turned 65. We are just about to hit mid-python, and as every day passes, more will want to retrieve their savings from the asset markets where they are currently stored. That's both shares (think of what most do at 65 with their Kiwisavers for instance - cash them in) and.....investment property.
They also have a culture with expectations of men working without rest, often still with poor views of womens capabilities and the stigma for women around having kids as they may not get much in the way of career opportunities after having a child, thus adding to the disincentive to have kids and keep pushing a career.
Our population is also in decline birthwise.
Plus we are losing skilled young kiwis to aus.
The numbers show growth because we import low skilled people and their families... but that's unsustainable and in the mid to long terms is a massive anchor on our economy and way of life. The growth is people that cant pay their way.. so every. One of us is having to pay a contribution annually for their pu lic services and infrastructure which is building every yr. It's not helpful at all.
As an immigrant working in an industry with a majority of labour consisting of immigrants, I can assure you the majority of imports are qualified people earning way above the average income (2-3 times).
These people often work harder and longer and they pay taxes that go a long way to fund infrastructure and public services.
NZ is losing all sorts of skilled people to AUS, this includes many immigrants who obtained NZ citizenship. It's one of the reasons the wheels would come off pretty quickly if immigration is curbed significantly.
BW, you state: "the bulge in the demographic python started to pass through in 2011, when the first of them turned 65" to explain why house prices will drop in the future. 2011 was 13 years ago... yet house prices have increased hugely since then. I think there were more people hoping to make money through property in 2021 than in 2011, and as soon as the numbers stack up again, i.e. interest rates drop, these people will buy again.
Why would you expect retirees to sell their property assets that yield net rents?
Surely an investment property, with rent effectively tied to inflation is a great source of retirement income. Compared to shares and term deposits.
Assuming a retiree may live for another 30 years. I would not be sure, fraud or a market crash with bank failures has not delated a large chunk of my share or term deposit asset base by 2054. But, I would be pretty sure my residential rental properties would still exist, and be yielding inflation adjusted net rents.
If you wanted to fix the housing Ponzi once and for all you would do something similar to our Australian friends.
1. 4.5% stamp duty
2. 7.5 % foreign buyers tax ( I would make this 10%)
3. And Capital gains tax
Thats how you stop your housing market been run like a Ponzi scheme.
The Leadership in our country is to weak for this plus looking after their own best interest and all their mates.
Imagine how much good you could do for the country with this sort of tax take.
Could sort out Policing,Health,Education and infrastructure in no time and get this country back on track.
Just follow the Aussie if we want to turn this country around.
All our young people are changing team very fast and you can't blame them.
And they know how to Win Olympic medals.
If you wanted to fix the housing Ponzi once and for all you would do something similar to our Australian friends.
1. 4.5% stamp duty
2. 7.5 % foreign buyers tax ( I would make this 10%)
3. And Capital gains tax
Get the entry tax levels right to prioritise owner occupier buyers over non owner occupier buyers and non resident buyers in the existing residential real estate market (i.e not new builds) and there is no need for the capital gains tax (an exit tax is an incentive for existing owners to hold on and not sell - look at the example with the bright line test and the impact of the extension to 10 years, then reduction to 2 years).
Look at Singapore's approach to prioritise owner occupier buyers:
https://www.propertyguru.com.sg/property-guides/additional-buyers-stamp…
Imagine applying Singapore's 20% or 30% stamp duty for a non owner occupier buyer to these purchase prices in the existing house market. It would make many non owner occupier buyers reluctant to outbid owner occupier buyers.
Trustee buyers are subject to a stamp duty of 65%.
https://m.facebook.com/story.php?id=100063631467052&story_fbid=10175979…
The more I think about the Singapore system the more it makes sense. It's almost as if Singapore has made rules which prioritizes the bulk of the population owning their own home. Imagine having just one of our political parties running on this plan.
Property investors number around 500,000 in nz. Which is only 10% of the population, yet all the financial rules and laws are fully geared to giving them a massive leg up over the other 90% of the population.
I believe that forcing property investors out of the existing home market, to build new, is the correct approach. With some incentives, like 30% rebates for materials exceeding building code requirements for insulation/double glazing or materials that have 50+ yr expected lifespans etc etc.
This time last year I predicted tomorrow was going to be sunny.
Last month, judging by the long range forecast, I decided it was more likely to be cloudy tomorrow.
Last week I checked Metservice and agreed with them there would be showers tomorrow.
Today I'm looking out the window and I think it's going to rain tomorrow.
Check back with me tomorrow, and I think you'll find my prediction of rain is correct, probably.
Wow !!! Just Wow !!!
""Economic data releases relating not only to the housing market but also the broader economy have been surprisingly weak over the past month or two," ANZ's economists say.
What a way to admit they haven't a clue.
Staggering. (Almost as staggering as the RBNZ's.)
The broader economy is weak because the people are mortgaged to the eyeballs. The banks suck em’ try. Imagine if house prices were at affordable levels. Our economy would be booming. No layoffs, no redundancies, less homeless, more families, happier people. But unfortunately, the NZ Governments haven’t had the foresight to manage our economy through policy and guidance. Total mismanagement. Now the banks own us and we are just blood bags to their share holders.
It always saddens me that comments like yours completely overlook a major part of NZ's finances and instead want to blame the government for everything.
Once again I need to remind you - and everyone else that gave you a thumbs up or nodded in agreement - that the RESERVE BANK OF NEW ZEALAND operates independently of government. It is the RBNZ that also influences monetary policy by 'controlling' the cost of money and/or how much money is in the system.
But no. Again and again those that are ignorant of how the money supply is manipulated by the RBNZ want tp blame government.
Sheesh. Look up the Dunning-Kruger principle. Everyone thinks they know how NZ's finances are run. Very few actually do.
The biggest lender of residential mortgages conceding there will be no growth is a worrying sign for the overall market. Those who called a bottom to the housing market might have been a bit premature. Even if rates are cut soon, the holding costs (rates, insurance, maintenance) are still climbing rapidly which makes substantial house price increases very hard to imagine any time soon.
They sure did, socialists love spending other people's money.
Just think.....the dopey gun buyback, Pike River, the Harbour Bridge walkway, 3 Waters, the Light Rail fail, bike lanes, billions on maoris, 15,000 extra bureaucrats, I could go on, but that's a start. Boondoggles galore.
Your hard-earned tax dollars at work folks.
Labour was like "You get a free "warm and dry" house, and You get a free "warm and dry" house, Everyone gets a free "warm and dry" house. Jacinda Ardern really thought she was Oprah.
And Kainga Ora would have continued just hiding all the debt and cost blow outs and pretending everything was just fine. Until one day it wouldnt be.
Surprise surprise. Many of us on here said this would happen last year when the banks came out with their housing market price increase predictions for 2024. They all seemed to completely ignore what the lag effect of higher interest rates and cost of living would do on the market. Not to mention other factors.
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