ANZ New Zealand's economists are sticking with a 2% house price fall this year, citing OCR hikes starting in July and persistent inflation pressure from oil prices as the main drags.
ANZ New Zealand's economists are maintaining their pick of a 2 percent decline in residential property values this year, describing a small fall as "the most likely scenario" despite admitting their forecast could prove unduly pessimistic.
The bank's latest Property Focus Report, published this week, points to two overlapping pressures on the housing market: rising mortgage rates and a weaker growth outlook driven in part by the Middle East conflict's effect on fuel prices.
Why ANZ sees further downside
The bank's economists acknowledge that house prices have already adjusted from their 2021 peak, and that the debate is now about the pace and depth of any further decline. Their core argument:
Interest rates are the bigger threat. While the oil price shock from the Middle East conflict is a negative for real incomes and confidence, ANZ argues the more durable pressure on housing will come from further OCR increases. They continue to forecast three OCR hikes starting in July, taking the rate to 3 percent by year end — lower than a previous forecast of 3.5 percent, due to a weaker economic growth outlook, but still a net increase from current levels.
Inflation complicates the picture. CPI inflation was already sitting at 3.1 percent — above the RBNZ's 1–3 percent target band — before the oil price shock. ANZ expects it to peak at 4.4 percent in the June 2026 quarter, which would support further OCR tightening even as growth softens.
Credit conditions remain restrictive. The RBNZ's debt-to-income limits, in place since mid-2024, continue to constrain how much buyers can borrow relative to income. This reduces aggregate purchasing power and acts as a structural headwind for prices.
The context: rates have already risen significantly
Two-year fixed mortgage rates have roughly doubled from their April 2021 low of 3.46 percent to a peak of 7.60 percent by October 2023, and have since eased to the mid-5 percent range, according to interest.co.nz data. ANZ's forecast implies they expect further increases from current levels, not a return to the lows.
For a borrower with a $500,000 mortgage at 5.5 percent versus 7.6 percent, the difference in annual interest costs is meaningful — though those who locked in lower fixed rates before the increases have been insulated. The pain is most acute for borrowers rolling off old fixed terms onto new ones at higher rates.
What a 2 percent decline means in context
New Zealand house prices remain well off their 2021 highs, though they have not collapsed. A 2 percent decline from current levels would be modest compared to the falls seen in some analyst scenarios — but ANZ's economists say the combination of OCR hikes, credit constraints, and oil-driven inflation压力的持续存在 means further upward momentum in prices is unlikely.
Whether the forecast proves accurate depends heavily on the trajectory of the Middle East conflict, global oil markets, and how the RBNZ ultimately weighs inflation against growth when setting the OCR. ANZ's three hikes versus a weaker growth outlook represents a genuinely uncertain call — one the RBNZ itself will be making in real time.
This article is for general information only and is not personalised financial advice. Seek advice from a licensed financial adviser (registered on the FSPR) for guidance specific to your situation.