ANZ Property Focus

ANZ Property Focus assesses the state of the property market in New Zealand, providing investors and prospective homeowners with an independent appraisal of recent developments.

2023 editions

November 2023: A spring chill (PDF 1.59MB)
House prices rose in October, with the REINZ house price index rising 0.4% m/m (ANZ seasonal adjustment), a touch weaker than we expected (figure 1). It’s not just house prices that were on the weaker side this month; the forward indicators of sales and new listings showed that there’s perhaps some further softness to come. Accounting for the starting point surprise, and adding a little more election inertia into our near-term view, we have revised down our 2023 house price forecast and now expect house prices to fall 0.4% in 2023 (3-month moving average), versus a 0.2% rise previously. If momentum doesn’t recover after the election-related dust has settled, our 2024 forecast is on thin ice for a downgrade too (we'll get our first post-election read in December). This month we changed our Official Cash rate forecast and now expect the next move on the OCR to be lower, albeit with cuts one quarter later than previously (Q1 2025). However, insofar as markets anticipate cuts, fixed mortgage rates are likely to fall before then.


October 2023: New faces, not many new places (PDF 1.43MB)
Migration into New Zealand is at record levels. Over the last year more people than live in Palmerston North or New Plymouth have moved here on net, after accounting for departures. All those migrants need a place to live and we are not consenting and building enough new dwellings to keep pace. The extra demand for places to live is putting upwards pressure on house prices and rents, especially in Auckland. At the same time, large numbers of New Zealanders are leaving the country permanently, further raising property market churn. Net migration also boosts labour supply, dampening wage growth, so the net impact on inflation and therefore mortgage rates is ambiguous. The RBNZ is assuming it will be a small positive net impact, but time will tell. 


September 2023: Going up (PDF 1.30MB)
We’ve revised our near-term house price forecast upwards and now see prices lifting around 4% (previously 3%) over the second half of this year, with house prices rising at around their current pace until autumn next year. Underpinning recent momentum, first-home buyers appear to have re-entered the market after a long hiatus. We don’t think recent levels of house price growth will be sustained over the second half of next year, as unemployment rises while interest rates remain high. Our outlook is for annual house price inflation to come in around 5% over 2024, then moderate to around 3% in 2025. If upside housing pressures result in upside CPI inflation pressures, the RBNZ is likely to respond with hikes, stopping the housing upswing in its tracks. Be careful what you wish for.


August 2023: Regional revelations (PDF 5.53MB)
This month we look at housing market developments across 14 key regions. Now that the house price cycle has convincingly turned a corner at the national level, regional over- or under-performance is worth investigating. We evaluate regional house prices, indicators of housing market tightness, key regional economic indicators, and regional measures of housing affordability. Only one region is currently experiencing positive annual house price inflation (clue: it rhymes with ‘best’ and ends with Coast). And while that region also happens to be experiencing some of the strongest retail spending relative to trend, it’s not the region with the lowest unemployment rate (Wellington) nor the region with the highest consents per capita (Canterbury). How does your local market stack up? See this month’s Feature Article.


July 2023: Running start (PDF 1.20MB)
House prices broke out of an 18-month downtrend in June, rising 0.7% m/m (sa). This was on the slightly stronger side of our expectations. We remain cautious about the outlook, and suspect that the running start to the upturn had some one-off factors nudging it along. But not all the data we monitor concurs. Auction clearance rates in particular suggest our forecast for around 3% growth in house prices over H2 is a touch soft. That may well be true, but we can’t lose sight of the broader economic backdrop: the RBNZ is seeking to engineer a looser (and more sustainable) labour market (ie higher unemployment) in order to tame CPI inflation, and if it doesn’t achieve this with the OCR at 5.5% it will hike by more. Our expectation is that CPI inflation will prove harder to tame than the RBNZ currently anticipates, pushing it back into hiking mode come November. That’s likely to lead to renewed upwards pressure on mortgage rates later in the year, and could even see housing headwinds dominate tailwinds as we head into 2024.


June 2023: Sure to rise? (PDF 2.12MB)
This month, we run a statistical analysis to try to disentangle the various drivers of house price inflation over the past 30 years. We find significant impacts from net migration, mortgage rates, consumer confidence, LVR restrictions, and a combination of policy changes including the introduction of the bright line test, the removal of interest deductibility on investment properties, CCCFA changes, and the COVID lockdown. Models are always as much art as science, and none should be taken as gospel. Sadly, they can’t magically eliminate the problem of trying to work out causality when lots of stuff is going on at once – as has certainly been the case in recent years! But the analysis is helpful for looking at how the market may evolve from here.


May 2023: On the floor, ready to floor it? (PDF 1.70MB)
The RBNZ’s relatively muted response to surging net migration and additional fiscal stimulus in the May MPS surprised us. Ultimately, for a time at least, this implies looser monetary conditions than we have been expecting. This, combined with surging net migration and the confirmed loosening in LVR restrictions from 1 June, has led us to upgrade our house price forecast. We now expect quarterly house price inflation to return to around its historical average pace over the second half of 2023 before sticky inflation (and its implications for the OCR outlook) puts renewed upwards pressure on mortgage rates. Net migration is a huge wild card for the outlook currently. The recent explosive pace alongside slowing construction activity is resulting in a rapidly widening housing deficit, adding pressure to house prices. In short, housing tailwinds now appear to be blowing a little stronger than the headwinds. But we’re not convinced the RBNZ will be able to let that run. We expect the RBNZ will need to tighten monetary conditions later in the year once all has been revealed in the data.


April 2023: Nearing the bottom (PDF 1.92MB)
The RBNZ is proposing that loan-to-value restrictions be eased. With inflation still well outside the target band, why would they want to juice the housing market? In our view, this isn’t the right way to think about it. Decisions about macro-prudential tool settings are not made through a monetary policy lens. That said, they’re relevant, and all else equal, any easing of financial conditions presents upside risk to the Official Cash Rate.


March 2023: Not a straight line (PDF 2.03MB)
2023 is turning out to be yet another year fated to be ‘interesting’ economically: January brought flooding, February brought cyclone Gabrielle, and March delivered global banking sector wobbles. This month we provide an update on how we’ve factored recent weather events into our outlook (spoiler alert: these are very uncertain), and also discuss the possible ways in which a global financial shock could impact the New Zealand housing market and broader economy. The potential impacts of recent financial market wobbles range from ‘complete game changer’ (ie if they are the beginning some something much larger) to ‘a relatively small blip in the road’. Without convincing information to suggest otherwise, our forecast assumes the latter. However, even if the wheels stay firmly on, global financial market woes could well mean tighter credit conditions for a given level of the OCR, meaning it’s difficult in this environment to focus only on upside inflation risks when discussing risks to our OCR call (for a peak of 5.25%). Market pricing has certainly shifted lower (a loosening in financial conditions all else equal), but that could all change in a number of days.

February 2023: Rain check (PDF 1.16MB)
House prices fell less than expected in the month of January, but it’s far too early to say if that’s the beginning of the market finding a floor a little earlier than expected or just a blip. Our outlook implies it’s the latter, as we maintain our outlook for a 22% peak to-trough decline in house prices, which if correct (a big if, to be honest) implies house prices have another 7% or so to fall from here. But cyclone Gabrielle, and to a lesser extent the Auckland flooding in late January, will certainly change the outlook for housing and residential construction in parts of the country, representing an upside risk to both house prices and construction activity. In largely unaffected regions, on the other hand, if the inflationary impacts of the weather events mean interest rates need to go higher, that would be an eventual negative for house prices and activity. That’s actually necessary, to free up resources for the rebuild. At this early stage, we don’t have a good handle on the timing or the magnitude of these impacts. We discuss some of the risks to the housing outlook that these events present, and will endeavour to incorporate more into our outlook as information comes to light.

January 2023: Key themes for 2023 (PDF 1.49MB)
In our first edition for 2023, we take a look at the key macroeconomic themes for the year ahead that will matter for the housing market. The economy is clearly softening, and over coming months, the RBNZ Monetary Policy Committee will need to make a call regarding when they have cooled things sufficiently to knock wage-price spiral risks on the head, allowing them to sit back and “watch, worry and wait”. All else equal, the end of rate hikes should quickly be followed by an end to house price declines, but that’s assuming the household sector broadly holds it together and forced house sales don’t pick up meaningfully. The wobbly global economy could always throw us a curve ball; housing policy changes and/or a significant net migration surprise could alter the landscape at the margin too. Forecast uncertainty remains elevated so we’ll need to remain nimble.