Westpac eases house price expectations amid surplus listings
Westpac New Zealand has revised its housing forecast for 2025, with chief economist Kelly Eckhold (pictured) now expecting more modest price growth as supply climbs and demand remains patchy.
The revision follows signs of a market slowdown in June, with ANZ reporting a 0.3% decline in house prices and renewed buyer caution as listings remain elevated and sales volumes soften across most regions.
Supply rebound tempers price growth
“We had expected the housing market to recover through 2025 and deliver close to long-run average house price returns of around 6% this year,” Eckhold said. “Only part of our story has come through thus far.”
While house sales are up 17% year-on-year, prices have lifted by just 1% in the first half of 2025.
According to Eckhold, this softer outcome is due to a stronger-than-expected supply rebound. “A stock of unrequited supply has accumulated and is now being brought to market,” he said.
Eckhold added that a “large pipeline of unfinished projects” is now delivering a steady flow of new homes, especially townhouses and apartments.
Investors return as tax, rates shift
Demand has responded to falling interest rates, with investors leading the charge.
“Investor housing credit has grown by 5.5% over the past year and is a key driver of the 4.7% aggregate growth in housing credit thus far in 2025,” Eckhold said.
Westpac’s investor value model also suggests prices remain attractive.
“House prices lie somewhat below fair value from an investor perspective now that interest rates and tax levels are lower,” Eckhold said.
Weak labour market and global headwinds persist
Despite the gains, households remain cautious.
“Westpac’s employment confidence survey indicates that households still perceive few job opportunities,” Eckhold said.
He also cited global uncertainty, weaker rents, and slowing net migration as factors dragging on demand.
“New rents are running at a negative annual rate,” the Westpac economist said.
Winter lull, spring rebound expected
Given the slow start to the year, Westpac now expects a flatter trajectory.
“Maintaining our previous forecast of 6.2% annual house price growth in 2025 now looks optimistic,” Eckhold said.
He projects just 0.75% price growth in the September quarter, rising to 1.75% in the December quarter as the peak season kicks in.
“Interest rates are now low and likely at mildly stimulatory levels,” Eckhold said, adding that mortgage rates under 5% should continue supporting demand.
Access the full Westpac New Zealand housing market update.
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