ANZ says in its latest Property Focus that it agrees with the Reserve Bank’s assessment that house price growth will be limited by households’ reduced appetite for debt.
It says house prices are still high relative to incomes and ongoing deleveraging, or paying down debt, will limit the extent of the upturn.
A shortage of listings and low interest rates continue to provide support for house prices, with prices up 6.1% on the year before.
Of the report’s 10 gauges, which predict the movement of house prices, two point to prices falling, two to prices increasing, two to prices increasing or remaining steady, two to prices dropping or remaining steady and two to prices stabilising.
On the negative side, housing affordability has been dented, households are trying to eliminate debt, the global economy is weak and migration is still negative although that may be turning. On the positive side, interest rates are low, housing construction is down, the number of months to sell is at a four-year low although in terms of housing stock supply is increasing faster than demand.
Overall, the report says the property market is building, with Auckland’s momentum spreading to other areas.
It recommends fixing home loans for one or two years, allowing borrowers to get lower interest rates than those paid on variable loans, locking in rate cuts that might not happen.
ANZ says it now expects the OCR to stay on hold until at least early 2014.
"Our new forecasts may look like a big change, given that we had originally been expecting policy normalisation from mid-2013. However, the reality is that many of the familiar business cycle dynamics we have gotten used to have now been sidelined by structural dynamics like deleveraging, the synchronised global slowdown and other central banks pursuing non-standard policies."