That estimate is in line with many local economists.
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Yesterday ANZ economists forecast house prices were set for a 12 per cent fall.
"The near complete lockdown in New Zealand through most of April 2020 placed restrictions on auctions and inspections, curtailing the volume of home sales," S&P analysts said.
"In the longer term, we expect that demand for housing will not be as buoyant as in the past several years as immigration will likely remain non-existent for some time with New Zealand's border closed until further notice."
However S&P said it also expected the large fiscal stimulus from the Government to reduce the severity in home price falls.
"We expect home prices to stabilise in line with our forecast rebound in economic activity and employment in calendar 2021. We also expect immigration driven population growth to resume slowly during this time and remain lower than recent peak levels."
The report also noted that reduced construction of new homes was likely to persist in the next 12 months, which would amplify "the persistent gap between demand and supply for housing across the country".
"Finally, interest rates are likely to remain low, which should also support price growth when economic conditions improve," S&P said.
Despite the downturn and the estimate of a one-in-three chance that it was worse that anticipated, S&P said it expected that its issuer credit ratings, on the six rated New Zealand banks and three rated non bank financial institutions, would likely remain unchanged.
"A contracting economy, rising unemployment, and weak consumer and business sentiment will affect the asset quality of banks in New Zealand, in our view," S&P said.
"However, we consider that the substantial fiscal and policy support from the New Zealand authorities and a strong economic rebound during fiscal 2021 (year ending June 2021) should help to limit the rise in credit losses."
S&P said it expected that the economic risks for New Zealand banks would revert broadly to pre Covid-19 outbreak levels by fiscal 2022 following the peak of the economic downturn.