ANZ New Zealand economists warn that a housing market slowdown is accelerating across the country as fading buyer demand and climbing borrowing costs weigh on nationwide sales. Sales volumes have trended downward across all regions throughout the year, dragging average house prices slightly lower according to the bank’s latest Property Focus report.
Rising Interest Rates Drive Fading Buyer Demand
The primary driver behind the cooling property market is the rapid rise in interest rates, alongside election uncertainty and broader economic headwinds. As New Zealand’s largest housing lender with total loans approaching $118 billion as of June 30, ANZ NZ tracks borrower activity closely. The bank’s economists report that the most visible shift in the housing market this year is a sharp contraction in buyer participation.
“The clearest shift in the housing market this year has been falling sales volumes, showing buyers have steadily stepped back as the year has gone on,” the ANZ report states, noting that declines have affected every region in the country.
While home values have largely held flat for extended periods, the persistent drop in demand is now impacting valuations. Average nationwide house prices are falling at roughly 0.5% per quarter.
Reserve Bank Cash Rate Pressures and Forecasts
ANZ economists expect interest rates to climb further, placing additional strain on prospective buyers and existing mortgage holders. Renewed global inflation pressures are intensifying expectations that the central bank will move to tighten monetary policy.
“Renewed global inflation pressures are now adding to the pressure [on the Reserve Bank] to hike [the Official Cash Rate],” the report says. ANZ anticipates the Reserve Bank will deliver three additional 25-basis-point hikes, which would lift the Official Cash Rate (OCR) to 3.5%.
Broader market indicators corroborate the slowdown. Inventories of unsold residential stock are climbing across most regions, while days-to-sell metrics have lengthened following a prolonged stretch of market stability. Seasonally adjusted auction clearance rates point toward flat or slightly declining property values in the near term.
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