It’s that time of the year when many property market commentators churn out their expectations for the next 12 months and I’m no exception. Here’s a quick recap of 2025 and a look ahead to 2026.
It did prove to be the year of conflicting forces
This time last year we suggested that 2025 had the potential to be ‘the year of conflicting forces’, as lower mortgages supported sales volumes and property values, but other factors acted in the other direction – primarily a sluggish economy and labour market. In the event, this has largely turned into reality, with sales volumes rising but only recently returning to a more normal level, and property values staying fairly subdued – certainly in a key market such as Auckland.
Of course, while a rising unemployment rate and increased job insecurity have weighed on the housing market, buyers who feel more confident have nevertheless been enjoying continued access to finance and of course lower mortgage rates. Indeed, 2025 has seen a comeback by mortgaged multiple property owners, including the clichéd ‘Mum and Dad’ investors.
This group has recently returned to around 25% of market activity, in line with their long-term average. The full reinstatement of mortgage interest deductibility will have played a role here, but lower interest rates themselves are likely to have been the bigger factor – significantly reducing any cashflow top-ups from other income sources.
Which factors might shape the market in 2026?
In keeping with our regular attempts to sum up each year ahead under a key theme/banner, it wouldn’t be a surprise to see some factors in particular rise above others to be important focus areas in 2026 – namely the regulatory environment in an election year (e.g. debt to income ratio caps, possible capital gains tax debates) and what borrowers choose to do with their mortgages.
Rate decisions could become much trickier as the monetary policy easing cycle comes to an end, and borrowers then have to weigh up the costs and benefits of short-term rates versus possibly moving to lock-in debt for longer durations of 3-5 years. Certainly, many borrowers appear to regret not taking five-year rates in the middle of 2021 and might be keen to avoid the ‘mistake’ again.
On a positive note, the economy is turning around. The Reserve Bank for example anticipates GDP growth of around 3% in 2026, with employment set to increase and the unemployment rate likely to drift downwards again. This will be supportive for property sales activity and of course tend to push up house prices too. Meanwhile, the stock of listings on the market has already eased downwards to a degree, which will tilt pricing power a little more away from buyers and a bit towards sellers.
Taking all of this together, after a calendar year total of around 90,000 in 2025, we anticipate property sales volumes heading up to around 100,000 in 2026 (and possibly higher again in 2027). A figure of around 5% for national growth in median property values seems plausible.
By past standards, that would be a slow rise in values after such a deep drop. But it’s worth noting that the Government is pushing very hard on housing supply initiatives, and the stock of housing has already risen compared to our population. This may cap medium-term house price growth.
This year will also see a General Election, and no doubt property taxes will be part of the campaign. To be fair, a National-led victory would probably see a capital gains tax go on the back-burner again. But regulation is still likely to be a key theme and consideration for the property market in 2026.
Kelvin Davidson
Kelvin is the Chief Property Economist at Cotality NZ.
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