House prices in New Zealand are forecast to rise over 4% over the second half of 2023 and continue rising at the current rate until autumn 2024.
This is according to new forecasts published by ANZ Bank.
The bank had previously forecast growth would be 3% for the remainder of this year and then flatten in 2024.
The house price cycle in New Zealand had turned, say the bank’s economists and prices have been “marching upwards” in recent months.
The average house price in the country could reach $812,000 by Christmas, up from the current $780,000 figure, Stuff reports.
Although indicators suggested the situation was far from “hot”, things were certainly heating up, according to the ANZ findings.
“Indeed, all turnarounds must start somewhere, and there are plenty of green shoots to be found in the August Reinz data. In each of the last three months, the house price index has risen 0.7% month-on-month, which is 8% annualised. Close to 100,000 net migrants have entered New Zealand over the last year, and that demand for housing is not being matched by supply,” ANZ stated.
However, they added that house price rises would cool down over the latter part of next year due to a rise in unemployment and as interest rates stayed high.
“Our outlook is for annual house price inflation to come in at around 5% over 2024 and then moderate to around 3% in 2025. If upside housing pressures result in upside CPI inflation pressures, the Reserve Bank is likely to respond with hikes, stopping the housing upswing in its tracks.”
The bank’s economists said borrowers would still find the cheapest interest rates in the longer fixes.
“That will suit those who believe the Reserve Bank could either hike again or leave the OCR on hold ‘up here’ at 5.5% for some time, but it won’t suit those fixing for shorter periods in the hope the Reserve Bank might cut soon.”
ANZ economists forecast one more OCR hike from the central bank. However, they said the domestic economy wasn’t cooling as quickly as required by the Reserve Bank.
“For us, that’s enough to make it worth considering fixing for longer rather than shorter. Long-term fixed rates are already lower and thus provide immediate benefits, whereas fixing for shorter will only end up being cheaper if mortgage rates start to fall,” the economists added.
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