Westpac Banking (ASX:WBC, NZE:WBC) revised its forecasts for house price growth in New Zealand over the year to around 4% from 6.2% previously, and retained its 6% forecast for 2026, according to a Friday report.

The bank had expected that lower interest rates, changes in the investor tax treatment of property, and an eventual improvement in the labor market later in the year would lead to a recovery in housing market volumes and prices. While house sales have increased by around 17% year-over-year, house prices have increased by just 1% over the first half.

Investor housing credit has grown by 5.5% over the past year, driving the 4.7% aggregate growth in housing credit thus far.

A stock of unrequited supply accumulated since 2022 and is now being brought to market, causing the supply of housing to rise with demand. Mortgage interest rates under 5% are expected to underpin demand.

Construction of new housing has stabilized at relatively high levels.