ANZ's economists now predict house values will lift over the last months of 2025. Photo: RNZ
ANZ has lowered its house price forecast for this year and now predicts values will lift over the last months of 2025.
The bank's economists had previously predicted no house price growth this year.
But it said that the Real Estate Institute house price index was up 0.3 percent year on year and the falls of winter seemed to be over.
"The Reserve Bank cut the OCR to 2.5 percent faster than we anticipated, and we now seeing it going a little further, to 2.25 percent.
"That will give the market slightly more support than previously envisioned. More generally, the housing market and economy look to have returned to the conditions that prevailed towards the start of the year, when the economy was growing modestly and house prices were inching up by 0.1 percent to 0.2 percent per month.
"In light of this, we are now forecasting house prices in Q4 2025 to be up 0.5 percent to 1 percent year-on-year rather than being unchanged."
- Do I have to use my KiwiSaver to pay for my partner's care? Listen to No Stupid Questions with Susan Edmunds
For next year, the bank's economists expect prices to grow 5 percent.
Economist Matthew Galt said there would be regional differences.
"Areas with strong rural economies have seen modest house price growth recently, while prices in Auckland and Wellington have been flat or falling."
He said low growth in rents had been weighing on house prices in the past year, reflecting a weak economy and improved housing supply.
"If rents on new tenancies had not fallen 1.6 percent over the past year and had instead increased by 4.5 percent, their long-run average, our modelled house price that equates ownership costs and renting would be 9 percent higher than it is now, all else equal. Rents might not be the first thing that springs to mind when thinking about where house prices could go, but they are very important."
Galt said home ownership running costs had eased from their 2022 to 2024 highs and were now back in line with their historical relationship with rents.
"Our forecasts anticipate home 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 in prices as the economy experiences a cyclical recovery next year.
"Falling rents and high council rates and insurance costs have been a material drag on house prices in recent years, which has dampened the impact of falling interest rates on house prices. However, we expect these factors to be much less of a drag going forward."
Galt said much of the slowdown in rent inflation was likely to be because of the 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 over the next year or two, demand from tenants will increase, and this will put more upward pressure on rents. But another part of the reason for slowing rent inflation is that the number of houses built has held up better through this period of slower growth than in previous downturns, and this extra supply will keep a lid on rent inflation."
Sign up for Money with Susan Edmunds, a weekly newsletter covering all the things that affect how we make, spend and invest money.
