ANZ predicts 32% fall from housing peak

The country’s biggest bank expects house prices to fall by 32%, when adjusted for wages, from their peak at the end of last year.

ANZ has updated its house price forecast after last week’s Reserve Bank monetary policy statement, which indicated the central bank expected to have to hit the economy harder to control inflation.

ANZ’s economists said they were still expecting a ‘‘soft landing’’ for house prices, but the outlook was bumpier than they previously thought. In nominal terms, house prices would drop 22% but that would increase to 32% when adjusted for wage growth. That would take prices 10% below prepandemic levels in real terms.

‘‘The fact that prices are down around 12% already puts us just over halfway through our forecast.

‘‘We see the level of house prices finding a floor in the third quarter of 2023, not long after interest rates stop rising, with only very modest growth thereafter.

‘‘Our forecasts assume a relatively steady and orderly pace of monthly price declines going forward, similar to that experienced over the past year.’’

The economists said the fact that mortgage rates had not yet peaked and sales numbers were still trending down suggested there was more price weakness ahead.

The number of days it took to sell a house was also high and trending up.

The borders having been closed and residential investment activity having been strong in recent years meant that the country’s ‘‘housing deficit’’ had probably been fully eroded, they said.

But things such as auction clearance rates in Auckland, sales and days to sell in Wellington, migration picking up, new listings being weaker than normal and a robust household sector could indicate a floor was coming for prices.

In September, net migration data was stronger than expected.

A shock to households such as higher unemployment was the biggest risk to the ‘‘steadiness’’ of the house price falls.

‘‘Essentially, if enough people have to accept whatever price is going on the day, we might actually find out what the marketclearing house price is.

‘‘We’re not seeing it now: The housing market is not clearing, as seen by low house sales and low auction clearance rates. It’s not great fun to find out what that number is in a hurry; the current standoff between buyers and sellers and the steady hissing as the air comes out of the market in an orderly fashion is the best adjustment path we can hope to tread on our way back to sanity.

‘‘While renting millennials might say they want house prices to fall 50% tomorrow, fact is, they would likely struggle to find a job if they did.’’