ANZ NZ Economists Cut Annual House Price Growth Forecast

The economists from the largest bank and the largest housing loan institution in New Zealand - ANZ Bank - are lowering their expectations for annual house price growth.

ANZ NZ's Sharon Zollner, Matthew Galt and David Croy stated in a new report: "Taking into account factors such as economic recovery, rising interest rates, the lack of growth momentum in the real estate market in the short term, and uncertainties related to the election, we have lowered our inflation expectation for house prices in 2026 from 5% to 2%. We maintain our inflation expectation for 2027 at 4.5%, and at that time, the price increase will be roughly in line with income growth."

They note house prices have been flat for three years, and there's "clear evidence" the economy improved in late 2025, which will be a tailwind for the housing market.

"However, house prices are starting 2026 with little momentum, and uncertainty from the upcoming [November 7] election – including the prospect of a capital gains tax [if Labour win] – may keep some buyers on the sidelines this year."

"Moreover, the Official Cash Rate [OCR] looks set to rise sooner rather than later after growth and inflation have both come in hotter than the Reserve Bank expected," Zollner, Galt and Croy say.

Following Friday's release of the December quarter Consumers Price Index, showing annual inflation of 3.1%, the ANZ NZ economists have brought forward their expectation for the first OCR hike, from its current 2.25%, to December 2026 from February 2027.

"As OCR hikes draw closer, mortgage rates are shifting from a tailwind to a headwind for the housing market. Weighing it all up, we have reduced our house price inflation forecast for 2026 to 2% from 5% previously."

As of September 30 last year, ANZ NZ had total housing loans of almost $114 billion, and total assets of $210 billion.

Zollner, Galt and Croy say average nationwide house prices are showing little sign of breaking away from a three-year flat trend, with the Real Estate Institute of New Zealand House Price Index down 0.1% from a year ago, on a seasonally adjusted and three month moving average basis.

"Indicators of the balance between demand and supply suggest prices will continue to be flat through the early part of 2026. The ratio of sales to inventories is a useful indicator of heat in the housing market and tends to give a three to six month lead on house price momentum. It is flat as a pancake, suggesting prices will be too."

They also note median days to sell has been stuck at 45 days through October, November and December, which is above the long-run average of 40, signalling a market still tilted in favour of buyers.

"The weekly auction clearance rate also points to quite a balanced market, signalling little movement in prices either up or down in the next few months," the ANZ NZ economists say.

"Rising demand has been met with plenty of listings of new property for sale, helping to keep price pressures in check. Inventories of property for sale have oscillated around a 10-year high for over a year now."

"One factor supporting the number of listings has been resilient house-building activity through this economic downturn. While there has been a steep drop-off in the number of homes consented from its 2022 peak, the number of consents per capita has only dropped down to its long-term average, rather than dropping well below, as it did after 2008. In the past few months, consents have increased in response to lower interest rates, which will further support the supply of new housing over 2026," the ANZ NZ economists say.

A further factor keeping house prices in check is low net migration.

"Net migration is likely to increase as the labour market recovers, but it may only be gradual given ongoing strength in the Australian job market. The unemployment rate in Australia is currently 4.1%, versus over 5% here."

In terms of the potential for a new capital gains tax, the ANZ NZ economists say there were some signs property investors pulled back in earlier times a capital gains tax was proposed by politicians, such as 2014 and 2017-2019.

This impact is not significant - not enough to break through the broader influence of the larger macroeconomic drivers of the real estate market - and during these periods, house prices increase by approximately 2% to 8% each year. However, discussions about imposing capital gains tax may to some extent curb the activity of the real estate market until the policy environment becomes clearer," said Zollner, Galt and Croy.

Regarding their prediction for the increase in the Consumer Price Index (OCR) in December, they pointed out that there would be a long period before then during which the situation was difficult to predict, so "it is very likely" that the first OCR increase will be implemented earlier or later than December.