A second major bank has predicted Aotearoa will see the biggest house price fall since the 1970s, just days after ASB made the same prediction.
Last week ASB released its Home Economics newsletter signalling larger lifts in mortgage rates could drive a further decline in house prices, which could see an inflation-adjusted 20 percent correction.
Westpac's acting chief economist Michael Gordon said in the bank's economic overview released on Tuesday, that it's a mixture of contributors cooling Aotearoa's property market down.
"Higher mortgage rates are already working to cool down the housing market. In addition, higher debt servicing costs and the rising cost of living mean that households’ budgets have been significantly squeezed compared to a year ago."
The bank expects house prices will fall by 10 percent over the 2022 calendar year but Westpac says the fall doesn't end there - expecting a further 5 percent drop over 2023.
"A 15 percent drop in house prices sounds large compared to history, but to put it in context, it would only take average prices back to where they were at the start of 2021."
Infometrics principal economist and director Brad Olsen said Aotearoa's economy is "red-lining" as it continues to operate above capacity, with growth suffocated by rising inflation and hard-to-find labour and materials.
Infometrics' March 2022 Quarterly Economic Monitor indicates annual economic activity rose 2.0 percent in the quarter, but underlying growth was struggling, with volatility expected to continue over the next 12 months.
"It's harder and more expensive to find growth in 2022, with intense difficulties finding staff and materials across New Zealand."
Olsen said rising inflation has forced the Reserve Bank to lift interest rates higher and faster, which would take some wind out of an overheating economy, with the risk of a hard landing increasing each day.
"Cost pressures are hitting the primary sector, with commodity prices pulling back slightly in recent times."