A major bank has drastically lowered its house price predictions as interest rates remain high and supply reaches a seven-year high.
BNZ released its May Property Pulse report on Thursday which included changes to the bank's short-term house price forecasts.
The report by chief economist Mike Jones expects a small 2 percent lift in prices over the 2024 calendar year. This is down from the previous forecast of 5 percent, however, the report expects prices to rise 7 percent over the 2025 calendar year.
"Last year's short string of monthly house price gains now look like a false start," Jones noted. "And we think current scratchy momentum will stick around for longer amid high mortgage rates, a deteriorating economic and labour market backdrop, and a jump in unsold inventory."
But Jones said he expects to see the stagnant growth give way to a "more obvious upswing next year" mostly due to predicted interest rate drops at the same time.
"More demand-friendly housing policies, population pressures, and a stabilising economy will add support. Acting in the other direction, affordability and cash flow constraints will cap the magnitude of any upturn," the report noted.
The predictions come after CoreLogic's latest House Price Index, released on May 1, showed national house values dropped slightly in April while listings increased.
The House Price Index edged down 0.1 percent in April and was 11 percent down on peal values. It brought the national average property value to $933,633.
CoreLogic NZ chief property economist Kelvin Davidson it's no surprise prices edged down given the influx in supply and tight lending conditions.
"It's no surprise price growth has flattened off. To be fair, buyers don't have it all their own way. For a start, they've got to have their finance in place first, and that's not easy with mortgage rates still hovering at around 7 percent," Davidson said.
"In addition, with new jobs still being filled and the unemployment rate relatively low for now, there aren't many 'forced sellers' out there at the moment either."
House prices surged during the pandemic peaking at a whopping $1.097 million average house value in February 2022.
