The Reserve Bank is now indicating it thinks the falls in house prices will slow during this year an

Date 25 May 2023

The Reserve Bank (RBNZ) has changed its view on house prices and now sees a much smaller overall fall than it did in its last detailed set of forecasts in February.

Back in February the RBNZ had forecast a peak-to-trough decline of 23%. Now, however, it sees just a 17% overall decline. In February the RBNZ said:

"House prices are projected to keep falling in 2023, consistent with very low sales volumes in recent months. House prices are assumed to have fallen by around 23% from their peak in 2021 to their trough in mid-2024, before recovering as interest rates decline toward their neutral setting."

But it has changed its tune somewhat in its latest Monetary Policy Statement (MPS) issued in conjunction with the latest Official Cash Rate Review.

It is now forecasting that the falls will be much slower than they have been in the second half of this year and will have just about finished by the start of 2024. It then sees house prices starting to rise (slowly) again in the second half of next year. In the latest MPS the RBNZ said that house prices have fallen 15.3% since their peak in November 2021, measured in monthly terms."However, there are early signs that house prices may not decrease as much as expected in the February Statement," the RBNZ said.

The rapid return of net immigration, an increase in the number of residents due to the one-off 2021 resident visa, strong nominal wage growth, stable mortgage interest rates, and a relatively low number of houses available for sale have contributed to a smaller decline in house prices than expected in recent months. These factors have led us to revise our house price forecast higher since the February Statement, and we now expect a peak-to-trough price decline of 17%, measured in quarterly terms.

The fall in house prices to date is expected to flow through to lower household spending over the projection, as aggregate household wealth has fallen substantially.

The Reserve Bank is now indicating it thinks the falls in house prices will slow during this year an