Huge house price pain still to come

However, the ANZ says when house prices are deflated by wages, to get a measure of the real price change, that 22% decline becomes a 32% drop, and the level of wage-adjusted prices ends up about 10% below that prevailing just before the pandemic.

The bank is also forecasting the OCR to peak at 5.75% - its previous forecast peak was 5%. That means a higher mortgage rate outlook and more downward pressure on house prices than otherwise.

ANZ chief economist Sharon Zollner says as prices are already down about 12% means the bumpy landing is just over half way through the bank’s forecast. “We see the level of house prices finding a floor in the third quarter next year, not long after interest rates stop rising, with only modest growth thereafter.

“Our forecasts assume a relatively steadily (and orderly) pace of monthly price declines going forward, similar to that experienced over the past year,” she says.