Australian house prices are not expected to plummet below pre-COVID levels with experts saying the local property market can look to the “soft landing” being experienced in New Zealand as a guide.

While Australians are only beginning to feel the pinch when it comes to increased mortgage repayments from rising rates that began in May, New Zealand saw its first rate rise in October 2021 when its Reserve Bank increased the cash rate by 25 basis points.

There have been four more rises since, with the expectation of another 0.50 percentage point increase when the Reserve Bank of New Zealand meets on Wednesday. That will take New Zealand’s cash rate to 2.5 per cent.

But economists say Australian households should take comfort from their neighbours who are leading the way in the housing downturn as it may offer some clues as to what could happen here.

New Zealand house prices have fallen 5.5 per cent from their November 2021 peak with forecasts it will drop 11 per cent by year’s end, according to ANZ New Zealand.

New Zealand have had a bigger house boom than Australia. Housing affordability is not getting any better, as bank serviceability tests rates go up, the amount you can borrow is shrinking faster than house prices are going down.

It gives us an idea of what might happen in our country, particularly in the major cities where we see anywhere between 10 to 12 percentage point drops and 5 percentage point drops in regionals. Experts say there are clear differences in Australia that could potentially see households better off.

New Zealand also introduced legislation last year that tightened home loan assessments. Given that, you would expect their housing market to fall faster and further. It is forecast the Australian housing market to fall 13 per cent peak-to-trough, taking prices back to April 2021.