ANZ has revised its housing market outlook, forecasting a late-year rise in house prices after earlier predicting no growth for 2025. The bank now expects property values to increase by 0.5% to 1% year-on-year in the fourth quarter, followed by a stronger 5% rise in 2026.
According to ANZ’s latest report, the Real Estate Institute’s House Price Index rose 0.3% year-on-year, signalling that the market downturn seen over winter has ended.
“The Reserve Bank cut the OCR to 2.5% faster than we anticipated, and we now see it going a little further to 2.25%,” the bank’s economists said. “That will give the market slightly more support than previously envisioned,” Stuff reported.
The report noted that the housing market and economy now resemble conditions from early 2025, when modest economic growth was accompanied by monthly house price increases of 0.1% to 0.2%.
Economist Matthew Galt highlighted regional variations, saying, “Areas with strong rural economies have seen modest house price growth recently, while prices in Auckland and Wellington remain flat or falling,” Stuff quoted.
Galt added that weak rent growth over the past year had weighed on house prices. “If rents on new tenancies had not fallen 1.6% and instead increased by 4.5%—their long-run average—our modelled house price that equates ownership costs and renting would be 9% higher than it is now,” he said, as reported by Stuff.
He explained that home ownership costs have eased from their 2022–2024 highs and are now aligned with long-term rent relationships. “Our forecasts anticipate ownership costs and rents staying in balance over the next couple of years, which points to broad stability in house prices, potentially with a modest increase as the economy recovers next year,” Stuff quoted.
Galt noted that high council rates and insurance costs had recently limited the positive impact of lower interest rates on housing prices, but said those pressures were expected to ease.
He also linked the slowdown in rent inflation to the broader economic cycle. “Wage growth, net migration, and employment all move with economic growth and are important for the rental market. As the economy picks up, demand from tenants will rise, putting more upward pressure on rents,” he said, Stuff reported.
However, Galt pointed out that the steady rate of new housing construction during the slowdown would help keep rent inflation contained.
Overall, ANZ’s latest outlook suggests a gradual recovery for New Zealand’s housing market as falling interest rates and improving economic conditions begin to restore confidence among buyers.
ISSUE
Leave a Comment