NZ's biggest bank downgrades house price forecast

New Zealand’s housing market is showing a fragmented recovery, with varying conditions across the country and increasing economic uncertainty. ANZ, the nation’s largest bank, has adjusted its forecast for house price inflation in 2026, while industry sentiment reveals a cautious optimism tempered by affordability concerns and shifting economic factors.

Economic Headwinds and Forecast Adjustments

For three years, New Zealand house prices have remained largely static. While economic improvements in the latter half of 2025 were initially expected to provide support, ANZ economists now anticipate a more subdued market. The bank has lowered its 2026 house price inflation forecast to 2%, down from a previous estimate of 5%. This revision reflects growing concerns about the timing of potential increases to the Official Cash Rate (OCR).

Did You Know? Canterbury is the most confident region, with 87% of respondents expecting prices to rise.

ANZ now expects the first OCR increase in December, earlier than the previously anticipated February of the following year. This shift is driven by higher-than-expected growth and inflation figures. As the prospect of OCR hikes looms, mortgage rates are transitioning from a supportive factor to a potential drag on the housing market.

Regional Disparities

The New Zealand housing market is not experiencing a uniform trend. Wellington has seen prices decline by 4% over the past six months, while Auckland has experienced a fall, though less pronounced. Conversely, Canterbury, Otago, and Southland continue to see price increases. This divergence suggests that local economic conditions and supply-demand dynamics are playing a significant role.

Early indicators suggest that prices will likely remain flat through the beginning of 2026. The ratio of sales to inventories, a key indicator of market heat, is currently stable, suggesting limited price momentum in the near term.

Expert Insight: The differing expectations between New Zealand and Australia highlight the varying stages of economic recovery and the unique challenges facing each market. A weaker economy and job market, coupled with high housing supply, contribute to the more conservative outlook in New Zealand.

Confidence and Future Outlook

Despite the cautious forecast, industry sentiment has improved from recent lows. Head of research Nick Goodall noted that while expectations remain conservative, there is a growing sense that demand is returning to the market. Factors contributing to this include decreasing interest rates and easing lending restrictions.

Goodall also highlighted the potential benefits of recent planning reforms, which aim to increase housing supply through greater build intensification. However, he cautioned that the effects of these reforms are likely to be gradual, with limited immediate impact. In the short term, price outcomes will continue to be influenced by sales volumes, listing levels, and borrowing capacity.

Frequently Asked Questions

What is driving the change in ANZ’s house price forecast?

ANZ has reduced its forecast due to the expectation of earlier increases to the Official Cash Rate (OCR) and uncertainty surrounding the upcoming election, including the possibility of a capital gains tax.

Which regions are experiencing the most significant price changes?

Wellington has seen a 4% price decline over six months, while Canterbury, Otago, and Southland continue to experience price increases.

What impact are planning reforms expected to have on the housing market?

Planning reforms are expected to support housing supply over time, but their impact will likely be gradual and will not immediately affect market conditions.

How might changing economic conditions and government policies influence the trajectory of New Zealand’s housing market in the coming months?

NZ’s biggest bank downgrades house price forecast