NZ housing cools while mortgage rate pressure builds on borrowers

Cotality’s latest Monthly Housing Chart Pack shows sales volumes down 2.4% year-on-year in March, following falls of 7.6% in January and 3.1% in February.

“We’ve now had three subdued months in a row, which indicates a weaker first quarter than expected,” said Kelvin Davidson (pictured), Cotality’s chief property economist.

National median values inched up 0.3% over the March quarter, yet are still 1.3% lower than a year ago and about 17% below the peak. Auckland values slipped 0.2% over the quarter while Christchurch rose 1.1%.

Davidson notes that January’s weakness partly reflected activity pulled forward into December, but says the fact softness has continued into February and March shows confidence remains muted and buyers are taking their time.

Geopolitical risk hangs over the outlook. The report notes that “market activity has fallen for three months in a row and Iran lingers”, with the US‑Israel‑Iran conflict raising the prospect of higher fuel costs, stickier inflation, and pressure on mortgage rates later in 2026.

ASB has already warned that the sweet spot of mortgage‑rate lows is ending and now expects RBNZ to start raising the OCR from July, with 25‑basis‑point hikes taking it to about 3.25% by year‑end.

Cotality, however, argues that if the conflict and fuel spike prove temporary, RBNZ should still be able to hold the cash rate steady for longer, allowing only a modest housing upturn.

First-home buyers resilient, investors watching rents and yields

Despite muted confidence, first-home buyers remain highly active, taking more than 27% of purchases nationwide in Q1 and around 30% in Auckland.

Improved affordability, access to KiwiSaver for deposits, and continued use of low‑deposit bank allowances mean many can buy without a full 20% deposit. In some markets, Davidson says mortgage repayments can now be comparable with — or even cheaper than — local rents.

Property investors face a tougher call. Rents are slipping, down 0.4% on Stats NZ’s flow measure and 1.6% on MBIE bond data, but gross rental yields have climbed to 3.9% nationally, around the highest level since mid‑2015. Auckland yields sit near 3.2%, with Wellington around 3.8% and Dunedin at 5.1%.

Movers remain quieter than usual too, accounting for just over 26% of purchases, below their long‑run share, which adds to the sense of a cautious, needs‑based market rather than a speculative one.

Refinancing wave and rate risks ahead

Around 58% of existing mortgages are fixed but due to reprice within the next 12 months, with a further 11% already on floating rates.

ASB’s view that OCR increases are looming suggests this re‑pricing window may be one of the last chances for borrowers to lock in near‑cycle‑low mortgage rates, rather than banking on further falls.

Access Cotality’s April Housing Chart Pack for more information.

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