(Bloomberg) -- New Zealand’s moribund housing market will need a summer sales surge to eat into a backlog of listings if prices are to stage a sustained recovery in 2025, according to ANZ Bank.
House prices fell 0.5% in October from September for their eighth consecutive monthly decline, CoreLogic said Friday in Wellington. The number of houses available for sale is at a 10-year high, the volume of transactions is subdued and it is taking longer to sell a home, ANZ said in a separate report.
“House prices will stabilize around the turn of the year and a gradual recovery will follow over 2025,” said ANZ Chief New Zealand Economist Sharon Zollner. “Ultimately, a sustained increase in house prices will require a meaningful lift in sales volumes to clear the backlog of listings in the market.”
Economic growth has stalled and unemployment is rising, making buyers wary of committing to borrowing even as prices drop. The Reserve Bank’s aggressive start to its monetary easing cycle — it has lowered the Official Cash Rate by 75 basis points since August and economists tip another 50-point cut next month — has started to reduce home-loan interest rates.
The pace of decline om house prices has slowed in recent months as borrowing costs fall, and that could be the sign of an approaching floor for property values, said CoreLogic New Zealand Chief Property Economist Kelvin Davidson.
“Rising sentiment may take some time to hit the ‘hard data’ but there’s a sense that the end could be in sight for the recent downturn,” he said.
While advertised mortgage interest rates have declined they remain relatively high, and lenders continue to apply a so-called test rate that is higher still when they assess new customers, the RBNZ said in a report Thursday. The test rate was around 8% in October, it said. By comparison, a mortgage fixed for one year is around 6%.
“Given the rapidly changing interest-rate environment, some banks reported they will review their test rates more frequently,” the RBNZ said. “With low overall lending growth, banks are facing competitive pressures to attract a limited pool of creditworthy borrowers.”
A lack of investor interest in the market has also damped demand, the RBNZ said, while there is a steady supply of newly built homes entering the market.
Industry contacts reported a potential glut of townhouses in recent months in largest city Auckland, where new builds made up about 25% of all listings in October, the central bank said.
Overall, the housing market remains loose and until it shows signs of tightening a meaningful upswing in prices isn’t likely to emerge, said ANZ’s Zollner.
“We expect that to become clearer over the coming months,” she said. “Prices may bounce along the bottom for a few months yet.”
(Updates with CoreLogic house price index in second paragraph)
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