While there are risks around forecasts, ANZ economists still think the near-term skew is to the upside.

ANZ continues to argue house prices will lift 3 per cent over the rest of this year before growth moderates in 2024 as lingering unaffordability, deteriorating job security, and the prospect of high-for-longer mortgage rates sets in.

While there are risks on both sides of our house price forecast, ANZ economists think the near-term skew is to the upside. “That said, it is possible election-related inertia in the market makes diagnosing how the risk profile is evolving more difficult than otherwise,” says Sharon Zollner, ANZ’s chief economist.

On balance, indicators suggest the housing market remains on a tightening trajectory. “Auction clearance rates in Auckland continue to go higher and inventories are going down despite relatively weak sales. Sales tend to lead prices by three months or so, suggesting our expectation that price momentum will fade a touch towards the end of the year is valid.”

Turning A Corner

She says if new listings remain weak enough to keep inventories on a significant declining trajectory, the country could easily be surprised to see the upside on prices. “But our baseline assumption is that if sales do hold up, sellers will be drawn into the market as they realise that it’s become an easier time to sell.”

All up, Zollner says the bank certainly wouldn’t call the housing market strong, but it does appear to have turned a corner, and it would be imprudent not to acknowledge that risks appear skewed to the upside, at least in the near term.

The risks she is talking about include government policy. “We’re not going to speculate on the election result, but insofar as housing goes, it’s going to be a big winner or loser on the day.”

It’s clear some party policies would add to housing demand. A house price inflation model ANZ completed in June suggested the combination of CCCFA changes, bright-line test extension and the change to interest deductibility knocked 3 per cent off quarterly house price inflation for a time and all these policies were “up for grabs”.