NZ’s Housing Market May be About As Balanced As It's Going to Get

The history of our residential property market has been marked by numerous large booms and occasional busts, which have generally led to worsening housing affordability over time. But when you take a step back and look across a range of market indicators at present, there’s a sense that things are reasonably balanced and there’s something for everyone in there at the moment.

First, property sales activity is rising fairly steadily, but not at a booming rate. Indeed, given the low starting point in 2022 and 2023, the consistent percentage growth in volumes since then has only really returned the level of sales to ‘normal’ within the past month or two. In other words, it’s been a slow grind back to normality for activity levels, but we’re roughly there now.

Consistent with that, property values are also looking to be on a more stable footing – but again, not soaring away. The Cotality Home Value Index has now recorded growth in national median values for four consecutive months, but the total rise over that period is only about 1%. Areas such as Hamilton and Christchurch have been fairly resilient, but the situation is patchier in Auckland and Wellington.

Within that general environment, there also seems to be some balance or normality for mortgage activity too. That is, banks are open for business, and those buyers who have put in the groundwork can generally secure finance without too much trouble. They also have plenty of choice amongst the existing (elevated) stock of properties listed for sale, often getting a good price or a better property than they anticipated.

Yet at the same time, there’s little evidence that vendors are having to capitulate either. Granted, the unemployment rate has risen. But most people are still feeling relatively secure in their jobs and don’t necessarily have to jump at the first offer they get from a would-be property buyer. That adds to the sense of balance across the market.

Our figures also show that the various buyer groups are finding opportunities if they want them. For example, first-home buyers remain a strong presence, consistently accounting for more than 25% of property purchases over the past year or two, well above their long-term average of 21-22%.

But mortgaged multiple property owners are also making a comeback too, recently rising to around 24% of activity –the reinstatement of mortgage interest deductibility will have been factor there, but also clearly the falls in interest rates themselves, which have significantly reduced the cashflow top-ups out of other income that are typically required on a recent investment property purchase.

Meanwhile, although the rental market is not fully balanced at present, it is tilted in favour of tenants, following a prior period where landlords were in the ascendancy. This appears to have levelled off, with rents stabilising recently, but not declining significantly either.

And finally, there is a reasonable degree of balance in terms of our physical housing stock (number of dwellings) and overall population. Shortages don’t seem apparent, or at least as concerning as they might have been in the past.

All in all, this could be a ‘sweet spot’ for the market to some degree. These typically may not have lasted in the past, but at least for 2025, we think conditions will remain fairly stable, with the influence of lower mortgage rates counterbalanced by other factors, such as the subdued economy and the lingering effects of debt-to-income ratio restrictions.