New Zealand’s banks have turned even more bearish on house prices after the Reserve Bank of New Zealand (RBNZ) lifted the official cash rate (OCR) by 0.5% last week, and tipped further aggressive tightening. While we continue to expect it to peak at 3.5%, we have also centralised some of the downside risks we are seeing to our (still very uncertain) house price outlook. A higher-frequency measure like the REINZ monthly house price index will see a larger peak-to-trough decline than this. “That suggests the downturn may result in a 20% fall in prices”…The magnitude of New Zealand’s house price bust will obviously depend on how aggressively the RBNZ hikes interest rates. If the RBNZ hikes that aggressively, then Capital Economics’ forecast is likely to come into play, with New Zealand experiencing a genuine house price crash.

Source: Stuff June 01, 2022 16:58 UTC