What will happen to house prices this year? Major bank changes its mind

ASB has revised its house price forecast for this year, taking it from predicting the largest increases of any of the main banks to the bottom of the table.

For this year, ANZ expects house prices to rise 6%, BNZ 6.8%, Westpac 7.2% and Infometrics 5.6%.

Treasury expects 3% growth.

ASB had predicted more than 9% but chief economist Nick Tuffley said that had been revised down to 3.4% for this year and 5.1% for 2026.

"The pick-up in sales has been sluggish so far and there is a lot of stock on the market, so that will temper how soon prices lift. And migration flows have falling quite sharply."

Infometrics chief forecaster Gareth Kiernan said his forecast was for less growth than most of the banks' because affordability and debt servicing costs were a major constraint on the ability of potential buyers to bid up house prices.

"We only see scope for moderate price growth this year as a result of lower mortgage rates and a turnaround in the labour market, with the latter boosting consumer confidence later in the year.

"I'd also note that there has been a big disconnect between population growth and house price movements since the start of the pandemic.

"This year we see interest rates still being the predominant driver of the market, but we expect weak net migration to reassert itself next year, with the lack of underlying demand caused by weak population growth limiting house price growth and possibly leading to renewed downward pressure."

At ANZ, economist Henry Russell said it was likely to be a "game of two halves" this year.

"House price momentum is likely to remain soft over the first half of the year given there is a large amount of listings currently on the market.

"While house sale volumes have been trending higher over recent months, a further lift is required to start reducing the level of inventory on the market and shift the market onto a tightening trajectory.

"We think the relative improvement in affordability will enable a recovery as the year progresses. Lower interest rates have materially reduced debt-servicing costs for borrowers, while household income growth has outpaced house price growth over the past few years seeing the median house price to median household income ratio fall back to around pre-Covid."

But he said he did not expect to see "the start of a surge".

"Affordability in the absolute sense still remains very stretched, limiting scope for further upside."

rnz.co.nz