PHOTO: 2025 home prices forecast to rise just 1.3%. FILE
Despite aggressive interest rate cuts from the Reserve Bank of New Zealand, home prices are forecast to rise far slower than expected – leaving first-time buyers still struggling in one of the world’s priciest housing markets.
🏦 RBNZ Cuts Can’t Revive the Market
The Reserve Bank of New Zealand (RBNZ) has slashed interest rates by 250 basis points since mid-2024, taking the official cash rate down to 3.00% at its August meeting. More cuts are expected before the end of the year.
But unlike neighbouring Australia, where lower borrowing costs have sparked a housing rebound, New Zealand’s property market has stayed flat.
📊 Key factor: rising unemployment is keeping household budgets tight, leaving many buyers cautious despite cheaper mortgages.
📊 What Analysts Are Saying
A Reuters poll of 12 property experts (August 18 – September 11, 2025) revealed:
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🏠 2025 home prices forecast to rise just 1.3% – a third of June’s 3.8% prediction and far below February’s 5.0% outlook.
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📉 2026 growth forecast trimmed to 5.0% (from 6.0%).
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📉 2027 growth cut to 4.3% (from 5.1%).
💬 “House prices have basically gone nowhere this year. The market remains flat. Confidence is weak, and unemployment has gone up – limiting house price growth,” said Kelvin Davidson, chief property economist at Cotality.
🏡 Affordability Still a Huge Hurdle
While mortgage rates have fallen more than 20% from last year’s peak, affordability remains stretched:
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💰 Median NZ house price: NZ$767,250
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💰 Auckland median: NZ$975,000 (30% higher)
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🏦 Homes still cost 6x average household income
Even with cheaper mortgages, the sheer debt load required to buy a first home is putting many off.
💬 Gareth Kiernan, chief forecaster at Infometrics, said:
“Rate cuts make it easier to service a mortgage, but the volume of debt needed is still huge. Affordability is better than 2022’s peak, but worse than any time before 2020.”
🔍 The Bigger Picture
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🏚️ Home prices are still down nearly 20% from their late-2021 peak – but that only partly offsets the 40% surge during the pandemic.
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📉 First-time buyers remain locked out, despite improved borrowing conditions.
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📉 Analysts expect only a slow recovery – no sharp rebound.
With job losses mounting and consumer confidence weak, even the most aggressive RBNZ easing cycle in decades might not be enough to reignite the housing market.