Experts warn of mixed signals in NZ property market
New Zealand’s housing market is showing signs of a modest recovery, although property values remain largely stagnant despite multiple interest rate cuts by the central bank, according to new data from real estate consultancy Cotality.
House prices edged up 0.2% in June from May, when they dipped 0.1%, lifting values back to levels last seen in February. The annual decline of 0.7% was the smallest since September, the report noted.
Still, the recovery is considered subdued as a surplus of homes on the market continues to favour buyers, placing downward pressure on prices. Broader economic headwinds, including a softening labour market and rising unemployment, are also limiting buyer activity.
“The subdued labour market remains an important factor,” said Kelvin Davidson, chief property economist at Cotality in Wellington. “It’s not only the direct job losses that are problematic, but a reduction in security for those who have kept their jobs will also be weighing on the property market.”
Employment levels have slipped to early 2023 figures amid ongoing global uncertainty, prompting caution among employers. A report from The Business Times highlighted that economists forecast the unemployment rate, which stood at 5.1% in the first quarter, to gradually increase over the rest of the year.
Borrowing costs have fallen, with two-year fixed mortgage rates now sitting below 5% at most local banks – the lowest since March 2022. However, analysts remain uncertain how much further lending rates will ease.
The Reserve Bank of New Zealand (RBNZ) has lowered the official cash rate (OCR) by 225 basis points to 3.25% in an effort to stimulate economic activity. Yet in May, the central bank removed its explicit easing bias, signalling a likely pause in future cuts. Market pricing indicates less than a 50% probability of the OCR dropping below 3% this year.
Despite lower rates, home prices have risen less than 1% in the first half of 2025. Davidson now forecasts a 3% increase in values by year-end, down from a previous estimate of 5%. The RBNZ has projected a 3.5% gain over the same period.
“For every upwards influence on the housing market at present, you can probably find a downwards factor,” Davidson said.
