New Zealand Central Bank Admits to Housing Price Forecast Error for the First Time; Annual Prices to Drop by 0.3%

HouGarden New Zealand, August 22 Report: In a rare admission of forecast error, the New Zealand Central Bank significantly revised its 2025 annual housing price forecast from a previous 3.5% increase to a 0.3% decrease in its latest monetary policy statement. This major forecast adjustment reflects the actual performance of the real estate market, which has fallen far short of the central bank's earlier optimistic expectations.

Chief Economist Paul Conway stated at a media conference, "Typically, we would expect housing prices to rise more at this point in the cycle, but they haven't. We do not expect them to rise significantly over the next 18 months."

This forecast adjustment marks a significant shift in the central bank's outlook on the real estate market. In the May monetary policy statement, the central bank had predicted a 3.5% increase in housing prices by 2025, but the reality has shown that housing prices have performed far below expectations.

Assistant Governor Karen Silk pointed out that although the central bank has lowered the official cash rate by 250 basis points from its peak, "we may have only seen about 50% of that effect transmitted to the economy, so there is another 50% yet to be transmitted."

Silk further explained the reasons for the slow transmission of interest rates: "Consumer behavior is one of them. If we consider the actual situation of mortgage rate refixing, people have opted for shorter terms, on-demand or up to six months at higher rates, believing that rates will fall further before they start shifting to longer terms."

The central bank expects housing prices to start recovering next year, rising by 3.9% by the end of 2026 and 5.0% by the end of 2027. However, this forecast is based on the central bank's judgment of the timing of economic recovery, and the previous forecast error also reminds the market to view these expectations with caution.