Nationwide prices may not regain late-2021 peaks until late 2029
ASB expects the Reserve Bank (RBNZ) to lift the official cash rate (OCR) by another 50 basis points this year, to 3.25%, according to the bank's Economic Forecast Update. The forecast assumes 25-basis-point hikes at the October and December 2026 decisions, up from the current 2.75%.
That outlook is a little more aggressive than the RBNZ's own. The central bank's September 2026 Monetary Policy Statement pointed to a 3% OCR by the end of 2026. Market pricing, meanwhile, has the OCR reaching 3.1% by the end of 2026 and 3.9% by the end of 2027.
"Risks are tilted to the OCR moving higher over 2027," ASB senior economist Mark Smith (pictured left) said.
He noted that the RBNZ may need to take rates above neutral to bring inflation back to 2%.
Westpac already expects a higher path, forecasting an OCR peak of 4% in 2027.
Housing stuck in a holding pattern
ASB expects national house prices to stay largely flat through 2026 before rising 3.5% next year. On that path, prices may not get back to their late-2021 peaks until late 2029.
Unsold stock has kept building, and the median time to sell reached 48 days in August 2026 on a seasonally adjusted basis, well above pre-COVID norms. House price expectations in ASB's latest housing confidence survey are at their lowest since 2023.
Senior economist Jane Turner (pictured center) said that with conditions favouring buyers, "we can't rule out near-term falls in house prices".
Cotality's latest Home Value Index suggests falls are already under way, with national values down for a sixth straight month in September and the median value of $797,078 now below the June 2023 cycle low.
Households on the back foot
Annual inflation hit 4.1% in the June 2026 year on the back of fuel costs, and ASB says it may not fall below 3% until the second half of 2027.
Unemployment rose to 5.6% in the June 2026 quarter, an 11-year high. ASB expects it to stay in the mid-5% range until late 2027 as firms add hours before adding staff.
Acting chief economist Kim Mundy (pictured right) said high fuel costs, soft house prices, a weak labour market and rising interest rates will "keep households on the sidelines for a while longer in our view".
For advisers, a rising OCR alongside flat prices points to tighter serviceability for clients refixing or buying over the coming year, even as buyers keep the upper hand on price.
Stay informed with the latest housing market trends and mortgage insights — subscribe to our free daily newsletter.
