ANZ predicts 15% house-price fall

ANZ has increased its forecast for house price falls to a drop of 15%, from 12% previously.

It said higher-than-expected inflation in the second quarter would mean interest rates would have to rise further than they might otherwise, which would push house prices down.

The Real Estate Institute’s house-price index has already fallen 6.6% from its peak in November 2021.

‘‘Meanwhile, indicators of market tightness continue to ease,’’ ANZ economists said.

‘‘New listings are back to their typical seasonal pattern but softening sales mean housing inventories are rising. Inventories are now at a six-year high, and trending higher.

‘‘Unsurprisingly, the number of days it is taking to sell a house is also trending higher. Combine slowing population growth as negative net migration threatens to continue for a while yet, with a still-respectable level of residential investment (despite labour and materials shortages), and the resulting supply-demand balance suggests that when the market does find a floor, there could be significant limits to how much prices will lift again as the market recovers.’’

They said the indicators still suggested house prices were on an ‘‘easing trajectory’’ and would fall until mid-2023.

‘‘And it’s not just the data telling us this; anecdotes from the coal face currently seem unified in suggesting the housing market is firmly in retreat. That said, recent data hasn’t been surprising us to the downside, relative to our forecasts. In fact, the average pace of monthly house price declines since November (around 1% per month), has been slightly smaller than the 1.1% to 1.2% declines we had pencilled in.

‘‘Given the ridiculously high starting point for house prices, we’d say the correction to date has been relatively orderly.’’

But they warned that headwinds had picked up lately, suggesting more of a decline to come than previously suggested.

The most important recent data for the housing market was the consumer price index out this month, which showed an annual increase of 7.3%.

However, the ANZ economists said house price forecasts were riddled with uncertainty at the best of times.

‘‘Given the added degree of uncertainty around the economy right now, as interest rates go higher, inflation remains on a tear, and borders reopen, it’s fair to say the housing market outlook could easily experience a sharper correction than we are forecasting.’’

Although a 15% fall in prices might sound a lot, it was coming off a gain of about 45% through the pandemic.

‘‘It can therefore be interpreted as very much a soft landing.’’