New Zealand’s housing market faces an uncomfortable combination: borrowing costs could rise again while house prices remain subdued. ASB expects two further Official Cash Rate increases this year, with national property prices unlikely to regain their late-2021 peaks until around late 2029.
PHOTO: ASB’s outlook gives homeowners little reason to assume a rapid rebound.
For homeowners waiting for a strong recovery, the bank’s outlook suggests patience may be required. For buyers, greater negotiating power comes with a complication: a cheaper property does not necessarily mean a cheaper mortgage.
According to Mina Martin’s October 5 report for NZ Adviser, ASB forecasts two 25-basis-point increases, taking the OCR from 2.75% to 3.25% by the end of 2026. These are forecasts, rather than decisions already made by the Reserve Bank. NZ Adviser
ASB’S OCR AND HOUSE PRICE FORECAST AT A GLANCE
| Measure | Outlook |
|---|---|
| Current OCR | 2.75% |
| ASB’s forecast OCR at the end of 2026 | 3.25% |
| Further increases expected by ASB | Two increases of 0.25 percentage points |
| National house prices in 2026 | Broadly unchanged |
| National house price growth in 2027 | Approximately 3.5% |
| Return to late-2021 national price peaks | Around late 2029, in nominal terms |
The interest-rate outlook was reported by NZ Adviser. ASB’s own housing analysis supports the flat-price forecast for 2026, moderate growth in 2027 and a potentially lengthy return to previous peaks. NZ Adviser
WHY RISING INTEREST RATES MATTER FOR THE NZ HOUSING MARKET
The property market can remain weak even while inflation requires the Reserve Bank to consider higher interest rates.
That creates a difficult balance. Borrowers may already be cautious, but persistent price pressures elsewhere in the economy can still influence monetary policy.
Westpac’s latest analysis highlights increases in electricity charges, council rates and other administered costs alongside the oil-price shock. It argues that ongoing domestic inflation could require more OCR tightening than the Reserve Bank previously anticipated. Westpac IQ
For housing, the potential consequence is straightforward: buyers may face tighter budgets at the same time sellers are hoping demand improves.
However, the OCR is not a mortgage rate. Fixed mortgage pricing also reflects wholesale funding costs, expectations about future rates and bank competition. A 0.50-percentage-point OCR increase does not automatically mean every home loan rises by exactly the same amount.
NZ HOUSE PRICES MAY TAKE EIGHT YEARS TO REVISIT THE PEAK
ASB’s projected late-2029 return to late-2021 price levels would represent roughly eight years between the national market peak and its recovery.
Importantly, that forecast concerns nominal prices — the dollar amount paid for property.
Recovering purchasing power is a different calculation. A home returning to its previous price after years of inflation would still be worth less in inflation-adjusted terms.
Nor does a national recovery date apply equally to every property. Different cities, suburbs and housing types can follow different paths.
A well-maintained home in a sought-after location may perform differently from an apartment facing substantial body corporate costs or a property requiring expensive repairs.
For an individual owner, the relevant evidence remains recent comparable sales and the condition of their home.
ASB SEES A DIFFERENT KIND OF PROPERTY RECOVERY
ASB’s housing research suggests the next upswing could be more closely linked to household income growth than the borrowing-driven gains of previous cycles.
The bank identifies three structural influences: mortgage rates may no longer enjoy the same long-term downward trend, demographic changes could moderate population growth, and additional multi-unit housing is expanding buyer choice.
That points towards a more measured recovery rather than another rapid surge in capital gains. asb.co.nz
For investors, this changes the question worth asking.
Instead of relying heavily on future price growth, the purchase needs to make sense against rental income, financing costs, maintenance, insurance, rates and the risks of vacancy.
For owner-occupiers, affordability and suitability may matter more than trying to identify the precise bottom of the market.
PROPERTY VALUES HAVE ALREADY FALLEN FOR SIX MONTHS
Cotality’s September 2026 Home Value Index recorded a 0.3% monthly decline, extending the national run of falling values to six consecutive months.
National values were 1.3% below a year earlier, with the median value at $797,078, below the previous cycle low recorded in June 2023. cotality.com
Property Noise examined those results in its report on NZ house values falling for a sixth straight month.
There is an important distinction between a forecast for broadly flat prices across a year and small declines within individual months. The two can coexist, particularly when conditions vary between regions.
Cotality’s estimated property values also differ from median sale prices. They should not be treated as interchangeable measures.
AUCKLAND HOUSING MARKET REMAINS A PARTICULAR PRESSURE POINT
The national picture masks regional differences.
Cotality recorded a 0.5% decline in Auckland values during September, while Hamilton increased 0.4% and Christchurch rose 0.2%. Wellington fell 0.7%. cotality.com
ASB’s housing confidence survey also showed a marked weakening in Auckland price expectations. In the three months to July, a net 4% of Auckland respondents expected prices to rise, compared with a net 14% previously.
Yet buying sentiment strengthened: a net 26% considered it a good time to buy. asb.co.nz
That combination is revealing. Buyers can regard conditions as attractive precisely because they do not expect rapid price growth.
Property Noise’s earlier coverage of Auckland’s stronger June sales alongside falling prices provides further context for a market where activity and prices do not always move together.
MORE HOMES FOR SALE GIVE BUYERS OPTIONS
A large selection of properties can reduce the pressure to make an immediate offer.
Buyers can compare competing homes, examine recent sales and investigate potential problems before committing.
But abundant listings also create a challenge for vendors: their home needs to stand out on price, presentation or suitability.
Property Noise explored that shift in NZ housing stock hits a 12-year high — buyers now hold the cards.
The wider distinction between relatively stable prices and subdued transactions is covered in our analysis of the August REINZ property report.
These earlier reports provide context; their figures relate to their respective reporting periods.
WHAT THE ASB FORECAST MEANS FOR HOMEOWNERS AND BUYERS
For existing borrowers, the practical issue is how an upcoming refix could affect household cash flow. The outcome depends on the rate currently being paid, the remaining loan balance, the term and the new rate available.
For buyers, price negotiations and mortgage affordability need to be considered together. Securing a discount is useful, but the repayments still need to fit the budget.
For sellers, a hoped-for return to 2021 prices is a weak substitute for current local sales evidence.
Useful questions include:
- What have comparable homes actually sold for recently?
- What repayments would apply at the available mortgage rate?
- How would the budget cope with higher borrowing costs?
- What maintenance or ownership expenses sit outside the mortgage?
- If buying and selling, what is the overall cost of moving?
Readers can explore repayment scenarios using the Property Noise mortgage repayment calculator.
THE NEXT OCR DECISIONS WILL TEST THE FORECAST
The Reserve Bank’s scheduled remaining 2026 OCR decisions are October 28 and December 9. Those meetings will determine whether ASB’s expected increases eventuate. Te Pūtea Matua
Until then, the forecast describes a possible path rather than a settled outcome.
For the NZ housing market, the central challenge is the relationship between borrowing costs, household incomes and buyer confidence. More choice can favour purchasers, but a durable recovery needs enough households willing and able to complete a transaction.
ASB’s outlook gives homeowners little reason to assume a rapid rebound. It also gives buyers a reason to look beyond the asking price and assess the full cost of owning the property.
Source acknowledgement: Mina Martin’s October 5, 2026 report for NZ Adviser, ASB economic research, Cotality’s September Home Value Index and Westpac economic analysis.