ANZ’s economists believe the Reserve Bank will cut interest rates sooner rather than later, but they also say that house prices will stay weak for now.
Thank you for reading this post, don't forget to subscribe!In their latest NZ Property Focus report, ANZ’s economists have changed their forecast for house prices this year. They now expect a 1% decrease instead of a 1% increase.
They also warn that house prices could fall even more than this new prediction.
However, they think the Reserve Bank (RBNZ) will lower the Official Cash Rate (OCR), currently at 5.50%, sooner than expected. This should lead to lower mortgage interest rates.
“Economic data about the housing market and the broader economy have been surprisingly weak recently,” ANZ’s economists say. “This makes it more likely that the RBNZ has done enough to control inflation, so they can start reducing interest rates sooner than we thought.”
They now expect the first OCR cut to happen in November, instead of February 2025. There’s a chance it could happen even earlier.
Even with lower interest rates, house prices are expected to stay low. “With ongoing issues in the job market and concerns about household incomes and job security, people are less likely to borrow money, which will keep house prices down,” the report says.
Because of this, ANZ has downgraded their house price forecast for 2024 from a 1% increase to a 1% decrease. However, they believe there will be more room for recovery in 2025 as mortgage rates drop.