An economist is warning even though house prices are falling, first home buyers will still find it "very unaffordable".
ASB and Westpac are predicting house prices to fall by about 20 percent over the next 12 months - the biggest drop since the 1970s.
ANZ economist Finn Robinson told AM on Wednesday it's still not good news for first home buyers.
"It's probably still going to be relatively unaffordable. Back in 2019 we were concerned about how unaffordable house prices were and if house prices only drop 10 percent, it's still going to be quite unaffordable," Robinson told AM host Ryan Bridge.
Robinson said ANZ is not predicting a fall of 20 percent like other banks are, with its forecast showing a "lot less drastic" fall.
"What is going on here is people are reporting an inflation-adjusted number and obviously inflation is very strong at the moment, it's almost seven percent," Robinson said.
"When you are looking at house price falls, you want to know, how much is my house price falling relative to all the other prices in the economy and that's where you get the 20 percent.
"When you look at how much actual house prices are falling, we are forecasting closer to a 10 percent fall, if you have a million-dollar house, that's closer to $900,000, which still sounds like a lot but a lot less drastic."
Robinson said it's not all doom and gloom and homeowners just need to look back to 2019 when prices were much lower.
"In our house price forecast, a 10 percent fall in house prices gets you 30 percent higher than we were in September 2019, so we would characterise that as a soft-landing because we are so much further than we were in 2019," Robinson told AM.
In some good news for homeowners, Robinson is predicting them to come through this period in "pretty good shape".
"It's definitely not going to be comfortable especially if you are a recent first home buyer but we are reasonably optimistic people can get through this pretty well," he told AM.
"When you look at the labour market, we have record low unemployment at 3.2 percent, wage growth we learned a week or two ago is now growing the fastest since 2009, so household balance sheets are actually in pretty good shape to get through this."
Robinson warns house prices will continue to fall over the next couple of years.
"I wouldn't rule anything out but if anything we see downside risk to our forecast at the moment because we are seeing so many headwinds in the housing market," Robinson explains.
"Mortgage rates are increasing, we're building like crazy still and the population is growing at the slowest it's been in the last 30 years or so. So that means that it's going to be hard for house prices to gain some significant momentum at least over the next couple of years."
Watch the full interview with Finn Robinson above.