ASB also dropped its forecast recently, to 1 percent. ANZ expects 3 percent.
BNZ cut its forecast to 2 percent from a previous expectation of 5 percent.
Westpac said listings had started to increase even as sales volumes remained modest, which was consistent with the market turning in buyers’ favour.
A key factor “leaning against” house price growth and activity had been the Reserve Bank’s focus on keeping interest rates high, Westpac said.
While it had expected the prospect of an official cash rate (OCR) cut early next year to provide support for the market as 2024 went on, the Reserve Bank was still talking tough and pushing out the prospect of a cut.
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“We think this more pessimistic view has been reflected in the downturn of many economic growth and confidence indicators in recent months - the housing market included,” Westpac’s economists said.
“While this pessimism persists, it seems hard to see a significant pick-up in house prices in 2024.”
But it said it still expected prices to rise 6 percent in 2025, pushed up by ongoing housing shortages driven by population growth and a slowdown in construction.
Infometrics chief forecaster Gareth Kiernan said Westpac had not been the most bullish of the banks.
ASB and BNZ were expecting double-digit percentage increases earlier in the year.
“Everyone has been paring their numbers back over the last couple of months, as their expectations of strong population growth flowing through into a pick-up in house price inflation have been dashed.
“That had left Westpac at the top end of the pack, so it’s not surprising that they’ve brought their forecasts down as well.
“As we had anticipated, debt-servicing costs remain a major constraint on buyers, and with the timing of interest rate cuts having been pushed out into 2025, there’s little relief from those high debt-servicing costs in the near term.
“Additionally, it appears that the mix of migrants, being more tilted towards lower-skilled and lower-income people than we’ve seen in the past, means that a significant chunk of the new arrivals are not in a position to consider purchasing a house either.
“So although there’s been more upward pressure on rents at times throughout the last 18 months, that hasn’t been repeated in house prices, and the market still looks quite weak.”
-RNZ
