ANZ Economists Expect Housing Market Stagnation and Rise in Interest Rates in New Zealand

Date Published: 21 February 2024

Key Facts

• The housing market in NZ is deemed as stagnant according to ANZ New Zealand’s economists.
• House prices have surged but sales remained unimpressive in the wake of increasing listings and stretched sale durations particularly in Auckland.
• January’s housing sales were labelled as “abysmal” by ANZ, marking the second lowest level over 32 years, despite the typical slackness post-Christmas break.
• Due to the ongoing sluggish sales trend since mid-2023, the housing market outlook is expected to worsen.
• As per ANZ’s prediction, the Reserve Bank is in line to raise the Official Cash Rate (OCR) two more times this year, taking it to 6%, thus escalating mortgage costs.
• ANZ is New Zealand’s premier mortgage lender with an exposure exceeding $105 billion.

Article Summary

The ANZ New Zealand economists have indicated a stagnant trend in the housing market, pointing towards a slowdown in property sales amidst strong house prices. In their latest report, they highlight an unusual softness in January sales with high inventory levels and extended durations to sell houses, specifically in Auckland. Recording this January’s sales as the second lowest in three decades, the market outlook is declared to be deteriorating.

The report has identified an ongoing decline in sales since the middle of 2023, causing house prices to remain broadly similar. High inventories have resulted from sellers holding out for a rising market, while buyers remain selective leading to a disconnect between inventories and prices. The time taken to sell a house in Auckland is back near their 2022 peak, with the average home taking around 48 days to sell. The report warns of an unsustainable situation where high inventories and long selling times persist despite soft sales.

Furthermore, the ANZ economists predict the Reserve Bank to increase the Official Cash Rate (OCR) twice more in the current year in response to stubborn domestic inflation. This would eventually push mortgage costs even higher. Homeowners are advised to be prepared as mortgage rate cuts in the near future seem uncertain. ANZ, being New Zealand’s biggest mortgage lender, holds a substantial stake in the current situation with over $105 billion worth of exposure.

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