ANZ sees housing pause, OCR cuts coming
New Zealand’s housing market lost momentum in June following modest gains earlier this year, with ANZ reporting that house prices fell slightly and buyer caution returned.
“After a run of small house price increases over the first part of the year, the housing market stalled in June,” said ANZ chief economist Sharon Zollner (pictured) in the bank’s latest Property Focus report.
The seasonally adjusted REINZ house price index fell 0.3% in June. House price growth for May was also revised down to flat (previously +0.1% m/m). The level of house prices now sits just 1.1% above its most recent low in October 2024.
Recent data from Cotality also shows first-home buyers are taking advantage of the market slowdown, making up 26% of Q2 purchases, with prices still 16% below their peak. Smaller investors are also gradually returning, supported by easing mortgage rates and tax changes.
Sales volumes also softened, slipping below historical averages despite sitting close to them in recent months.
“They remain well up from their low point around 2023… but are showing no sign of moving to a position of strength,” Zollner said.
Price weakness was widespread across 12 of 16 regions. However, regional resilience was noted in areas supported by the rural economy, including Canterbury, Waikato, Otago, and the West Coast.
Listings high, buyers cautious
New listings in June remained elevated for the time of year, and inventories continue to hover near decade highs. While stock levels provide buyers with choice, they are keeping price growth subdued.
“Plenty of choice has been tempering house price growth,” Zollner said.
Although inventories have recently ticked down, anecdotal evidence suggests many vendors are pulling listings in hopes of re-listing later.
The market is still tilted in favour of buyers, with median days to sell remaining above average and auction clearance rates hovering around 35-40%.
“The sales-to-listings ratio… points to house prices going sideways for a while yet,” Zollner said.
OCR forecast: three more cuts coming
ANZ expects the Reserve Bank to deliver three more cuts to the official cash rate, taking it to 2.5% by February 2026.
“We remain of the view that three further cuts in the OCR will be needed to shore up the economy and stabilise inflation,” Zollner said.
The latest inflation print of 2.7% year-on-year is “not exactly comfortable” for RBNZ but is in line with forecasts. Core inflation is easing, and spare capacity in the economy continues to weigh on medium-term inflation risks.
With the July OCR hold and softer data – including a negative 0.3% GDP Nowcast – ANZ is forecasting cuts in August, November, and a final “pencilled-in” move in February.
Borrowing strategy: time is on borrowers’ side
The bank continues to recommend a mixed-term mortgage approach, with rates largely stable this month and further OCR cuts expected.
“Borrowers have time on their side before choosing to extend the duration of their fixes at the low point of the cycle,” Zollner said.
While fixing short for another six months may appeal to many, ANZ suggests “hedging your bets and spread your borrowing over several terms.”
Council rates outlook: slower hikes ahead
The feature article this month focused on council rates, which have risen 7–12% annually in recent years. ANZ expects smaller but still significant increases ahead, though recent trends offer relief.
“Wage and construction cost inflation have fallen back, and interest rates on local government debt are coming off their peaks,” Zollner said.
Slowing GDP and population growth should help local infrastructure catch up.
However, funding challenges remain, with upward pressure on rates likely to persist.
“Essential local government infrastructure will need to be paid for somehow,” the ANZ economist said.
Access the full ANZ report for more information.
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