Higher interest rates weigh on buyers but further downside looks limited
ANZ has cut its New Zealand house price forecast and now expects prices to keep easing until mid-2027 as higher interest rates dampen buyer demand. Its economists say much of the post-COVID adjustment has already happened, limiting how much further prices can fall.
In its latest Property Focus, ANZ forecast prices would end 2026 about 2% lower than they started, a sharper fall than the 1% decline it previously expected. It now sees prices down another 1% over 2027, reversing an earlier call for a 2% rise, before growth gradually resumes from late 2027.
ANZ is not alone in turning more cautious. Westpac has also cut its forecast and now expects national house prices to fall 1.4% in 2026.
The Real Estate Institute of New Zealand (REINZ) house price index fell 0.3% in September on a seasonally adjusted basis, its fourth monthly decline in a row. Auckland prices have fallen by about 1% a quarter since mid-2026, and Wellington’s by about 2%.
Rates drive the slowdown
ANZ’s economists said “rising interest rates appear to be the main driver of this year’s slowdown”. Sales volumes have dropped from last summer’s peak, auction clearance rates have weakened, and new listings remain high, so buyers can take their time.
The Reserve Bank of New Zealand (RBNZ) has raised the official cash rate (OCR) twice since July, to 2.75%. ANZ expects three more 25-basis-point increases, taking it to 3.5% by March, as economists broadly agree the OCR has further to climb.
Fixing strategy
For borrowers, ANZ said “we see merit in fixing for 2 to 3 years”, noting this costs little more than a one-year fix. Six-month rates are the cheapest but offer little protection if rates keep rising.
“There’s not really anywhere to hide,” the bank said, adding that the decision is about managing risk rather than trying to pick the bottom of the cycle.
How far is left to fall?
ANZ compared current prices with four measures of fundamentals: house-price-to-income ratios, the RBNZ’s sustainable house price indicator, ownership costs compared with renting, and house prices compared with building costs. Prices remain slightly above most measures because long-term interest rates are now higher than they were five to 10 years ago.
Separate estimates put figures on that ownership gap. Bank of New Zealand estimates that buying a median-priced home now costs about 35% of household income, compared with about 25% for renting, and expects that gap to widen as mortgage rates rise.
However, the difference between house prices and building costs is near historic lows, and the economists said “the remaining downside is limited”.
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