Spending on household furnishings is picking up, and Kiwibank says this tends to happen when homeowners have selling or moving in mind
After months of hibernation, there are tentative signs that New Zealand's housing market might be stirring from its slumber. The latest clue is that spending on household furnishings is picking up, suggesting homeowners are getting their properties ready for what could be a more active spring selling season.
Mary Jo Vergara (pictured left), senior economist at Kiwibank, says that this is a telling indicator, as new TV or couch purchases generally happen at moving time.
“When we start to see a bit more demand in that space, it can tell you about how people are thinking about putting their houses up for sale or buying a new house,” she said.
This uptick in home improvement spending is right at the brink of the spring selling season. And while headline inflation has crept back up to 3% – driven largely by eye-watering council rate increases (up 8.8% in just one quarter) and electricity bills hitting their highest levels since the 1980s – some tentative recovery in housing is starting to emerge.
A builder’s market (if only there were buyers)
For those thinking about construction, the conditions are looking promising. Construction costs rose just 0.8% over the past year, the softest increase since the Global Financial Crisis. Sabrina Delgado (pictured right), economist at Kiwibank, notes this is "very soft" by historical standards.
"It seems like it's a good time to build, but it's really just a reflection of the housing market that's still lying dormant," Delgado said.
“But I think we do have promising development on the horizon for that. The Reserve Bank is planning to loosen their LVR ratios from 1 December. It’s a pretty big move, and it’s going to help get things warmed up for the housing market.”
Rental inflation has also cooled considerably, dropping to 2.6% from its recent peak of 4.8%. This easing pressure on rents is a sign of both the dormant housing market and softer migration flows – good news for tenants, but another sign of reduced heat in the property sector.
December’s game-changer
The real catalyst for change could come on Dec. 1, when the Reserve Bank loosens its loan-to-value ratio (LVR) restrictions. Though advisers have doubts over the scale of the impact, Delgado said it’s a “pretty big move” – although admits that the impact likely won’t be visible until further into 2026.
Vergara said the changes were overdue.
"We always flagged this change because if you look at how housing credit has been performing, it's been well below the long-term averages, so there's no need to have this chokehold on housing credit right now,” she said.
“We’ve also got DTI restrictions in place already, so that’s already acting as a guard rail for the next time we see a bit lift in house prices. It keeps those in check, so there’s no need to have LVR restrictions at the levels that they once were.
“Banks are now able to lend a lot more in terms of those low deposits, which is going to be helpful for first home buyers. Investors will also be happy to see that those have eased back.”
Rate cuts still on track
Despite inflation hitting 3%, Kiwibank still expects the Reserve Bank to proceed with another 25 basis point cut in November. The current inflation spike appears to be a temporary blip, driven mainly by those administered costs like council rates rather than broad economic strength.
"It's not the number we want to see, but it shouldn't stand in the way of the Reserve Bank cutting again in November," Vergara said.
When you strip away the volatile components – food, fuel, and those pesky council rates – underlying inflation measures are behaving themselves, sitting within or heading toward the Reserve Bank's 1-3% target band.
With the December quarter traditionally bringing softer pricing (think seasonal food prices and retail discounting), inflation should ease back below 3%. Combined with loosened lending restrictions and continued rate cuts, the ingredients for a housing market revival are slowly coming together.
For now, those new couches and freshly painted walls might be the early signs of a market preparing to move again.
