New Zealand housing market faces biggest ‘down phase’ in decades
Sustained price weakness adds to the burden on households already battered by surging fuel costs
Add BT as a preferred source
[WELLINGTON] New Zealand house prices fell to a three-year low in July, extending a slump that began in early 2022 and leaving the market in its weakest state in decades.
Prices fell 0.3 per cent from June when they declined a revised 0.3 per cent, property consultancy Cotality said on Saturday (Aug 1) in Wellington, citing its home value index. Prices are the lowest since July 2023 and are still 18 per cent below the January 2022 peak.
“This broad ‘down phase’ for the property market is the longest and deepest we’ve had for at least 30 to 40 years,” said Kelvin Davidson, chief property economist at Cotality. “The major downturn actually happened back in 2022 and 2023. It’s been a soggy picture ever since.”
Sustained price weakness adds to the burden on households already battered by surging fuel costs, suggesting consumer spending will remain subdued for some time which will limit an economic recovery.
The Reserve Bank of New Zealand raised its official cash rate last month and signalled it is prepared to keep doing so to counter emerging inflation pressures, which will heap more pressure on the property market.
“There’s certainly very little sign of any meaningful upturn on the horizon yet,” said Davidson. “The stock of listings remains elevated and this is giving buyers the balance of power when it comes to pricing. It’s therefore no surprise that values generally remain sluggish.”
The current price reversal is expected to be much longer than after the global financial crisis, when New Zealand house values fell 10 per cent but were back to pre-crisis levels in less than five years.
Higher interest rates and the uncertainty around the US-Iran peace deal are weighing on buyers, Cotality said.
Consumer confidence rose in July, but that masked a decline among responses received late in the month when the Middle East conflict re-erupted, an ANZ Bank New Zealand report showed on Friday.
Earlier in the week, a gauge of business confidence showed a similar pattern suggesting hiring will stay subdued in coming months until there is more clarity about the global outlook.
The Reserve Bank of New Zealand raised the official cash rate to 2.5 per cent on Jul 8 and said further increases were likely, prompting investors to price in an increase to 3 per cent by the end of 2026. The next rate decision is on Sep 2.
Wholesale borrowing costs have risen this year due to the global oil shock and the outlook for inflation, and that has been passed on to New Zealand mortgages with the average two-year interest rate at or above 5.2 per cent compared with 4.5 per cent in late 2025.
While home-loan costs have steadied in recent weeks, the likelihood is that some rises are on the cards again in the short term, said Davidson.
Fundamentals such as population and wage growth will ultimately drive a recovery in prices, he said.
“Values will almost certainly start to rise again at some stage, but this may be a story for next year,” he said. “The short story is that housing market conditions remain very subdued right now.” BLOOMBERG
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
Share with us your feedback on BT's products and services
