One of the country's biggest banks is picking house prices won't fall until interest rates rise.
"They will be obliged to talk more about that, which will be interesting," ANZ chief economist Sharon Zollner told The AM Show.
The Reserve Bank has kept interest rates very low to stimulate borrowing to help the economy get through the shock of COVID-19. Unfortunately for would-be first-home buyers, much of the borrowing has gone straight into the housing market - pushing up prices faster than ever before to new record highs.
Zollner said it's unlikely the Reserve Bank will unveil new tools on Wednesday designed to rein in speculators, such as debt-to-income ratios or caps on interest-only lending.
But moves the Government made against investors in March - extending the bright-line test and closing a tax "loophole" that favoured them over owner-occupiers - is starting to have an effect already, Zollner said.
"Anecdotally it does appear that investors are stepping back a little bit. They're not in the auction rooms in the same numbers that they were, so we are expecting the housing market to cool somewhat."
But the impact has been limited, despite threats from landlord groups to exit the market.
"It doesn't appear that we are seeing a fire sale of properties... [we see] house price inflation dropping back to something small and positive. At this point we don't see house price falls."
Data from realestate.co.nz shows there have been fewer homes up for sale in recent months than a year earlier, despite double-digit percentage growth in demand.
"Stock shortages have posed real challenges for buyers and we can see how much pressure this has put on prices," said spokesperson Vanessa Taylor.
Labour, which holds a majority in Parliament, has previously said it doesn't want house prices to go down. Zollner said future moves by the Reserve Bank - blamed for much of the rise thanks to low interest rates - could be what eventually turns the tide.
That's because over the next four years, landlords will be progressively stripped of their ability to write off interest costs, bringing them into line with owner-occupiers.
"When eventually interest rates do eventually go up, there is now a risk investors could actually sell up in that instance, because it now comes with a tax increase."
If the Reserve Bank does introduce other measures aimed at taming speculation, Zollner said the Government would likely welcome them.
"I don't think they'd be sorry to see limits put on investors, for example, given they whacked them with a mallet a few weeks ago. The question is whether the Reserve Bank would take that view, because that's quite a different lens to look at it - the Reserve Bank comes at it from a financial stability point of view, whereas it has this whole political aspect to it as well. It will be interesting to see how those things are reconciled."