PHOTO: Tony Alexander: When Will New Zealand House Prices Finally Start Rising Again? FILE
Economic Confidence Is Improving—So Why Isn’t the Housing Market Responding?
There are growing signs that New Zealand’s economy is beginning to stabilise, but according to independent economist Tony Alexander, the country’s housing market has yet to receive the memo.
While falling fuel prices, easing global tensions and a more optimistic economic outlook are helping to lift confidence, home buyers and property investors remain cautious, keeping the property market subdued despite expectations of better times ahead.
The key question now facing homeowners, investors and first-home buyers is simple:
When will house prices actually begin to recover?
Better Economic News Is Emerging
Several recent developments have improved New Zealand’s broader economic outlook.
Lower fuel prices, easing international uncertainty and expectations that the Reserve Bank of New Zealand (RBNZ) may delay any future Official Cash Rate increases until later in the year have all helped improve confidence.
Normally, improving economic sentiment flows through into increased housing activity.
This time, however, buyers are taking a far more cautious approach.
Open Homes Remain Quiet
According to Tony Alexander’s latest nationwide survey of real estate agents conducted with NZHL, buyer activity remains subdued.
Although attendance at open homes has improved slightly compared with earlier in the year, agents continue to report lower numbers of prospective purchasers inspecting properties.
Auction attendance has also remained soft, suggesting many buyers are still choosing to wait rather than commit to a purchase.
The result is a housing market that remains characterised by:
- Careful buyers
- Longer selling periods
- Greater negotiation
- Stable but subdued activity
Property Investors Are Still Sitting on the Sidelines
Investor confidence also remains weak.
Alexander’s latest investor survey found relatively few landlords are actively planning to purchase another investment property over the next 12 months.
At the same time, a sizeable proportion continue to consider selling, reflecting ongoing uncertainty surrounding both market conditions and Government policy.
While improving fuel prices have eased some concerns, investors continue to face several challenges.
Finding Good Tenants Remains Difficult
One issue continuing to frustrate landlords is tenant quality.
Alexander notes that many investors still report difficulty finding suitable long-term tenants.
A combination of increased rental supply—particularly new townhouses—and softer population growth has shifted bargaining power towards renters.
For landlords, this means:
- More competition
- Longer vacancy periods
- Greater pressure on rents
- Reduced investment returns
Migration Could Become the Turning Point
One factor that could improve conditions over the medium term is stronger migration.
Although net migration has started recovering from recent lows, annual inflows remain well below long-term averages.
As population growth gradually strengthens and the current oversupply of new housing is absorbed, rental demand is expected to improve.
That process, however, is likely to take time.
Many analysts believe meaningful improvement may not occur until 2027.
Election Uncertainty Is Weighing on Investors
Another major factor influencing today’s market is politics.
With New Zealand heading towards a General Election later this year, many investors are adopting a wait-and-see approach.
Among the key concerns are the possibility of:
- Changes to tenancy legislation.
- Tighter regulations favouring tenants.
- The return of restrictions on mortgage interest deductibility.
- Additional property tax changes.
Until there is greater policy certainty, many investors appear reluctant to expand their portfolios.
When Will House Prices Start Rising Again?
Alexander believes improving economic conditions will eventually support stronger housing demand.
However, confidence alone is unlikely to generate an immediate rebound.
Instead, any recovery is expected to be gradual, driven by:
- Lower interest rate expectations.
- Improving consumer confidence.
- Stronger migration.
- Reduced housing oversupply.
- Greater certainty following the General Election.
Rather than a sharp rebound, the market appears more likely to experience a slow and measured recovery over the next 12 to 24 months.
What It Means for Buyers and Sellers
For buyers, current conditions continue to provide opportunities.
With more choice available and competition remaining relatively subdued, purchasers retain significant negotiating power.
For sellers, pricing realistically remains critical.
Properties presented well and priced in line with today’s market continue to attract interest, while overpriced homes are generally taking longer to sell.
The Bottom Line
The economic outlook for New Zealand is improving, but the housing market remains cautious.
Tony Alexander’s latest surveys suggest buyers and investors are encouraged by improving conditions, yet few are ready to move decisively.
Until confidence translates into increased activity—and political uncertainty eases—the housing market is likely to remain steady rather than spectacular.
For now, patience continues to be the defining feature of New Zealand’s residential property market.
SOURCE: ONEROOF