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PHOTO: ANZ Property Focus

We have nudged up our house price forecasts on the back of a slightly better economic outlook and lower mortgage rates, but only slightly. We expect that
house prices will fall 12% (only a little above our previous forecast of 13½%), but risks are now considered more balanced.


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House prices often fall in economic downturns, especially in real terms (that is, adjusted for how much other prices have increased). This downturn is
expected to be no different, though we’d discount the impact of the initial fall in GDP due to the lockdown, as this reflects imposed constraints on activity rather
than individual economic choices.

Both people’s willingness and ability to pay for houses will be affected by the economic downturn. Firm revenue and household income expectations will be
lower, while unemployment and business failure rates are expected to increase. Some homeowners will experience job losses and financial distress.

Uncertainty is huge, and households and firms are expected to be cautious, including when it comes to taking on debt.



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