Following one of the largest booms in the developed world during the pandemic, New Zealand’s house prices experienced a significant decline.
As illustrated above by Justin Fabo from Antipodean Macro, New Zealand’s real inflation-adjusted house price has returned to its pre-pandemic level, according to the REINZ house price index.
Separate data released this week by Cotality suggests that New Zealand house prices continue to fall, down by 0.1% in May nationally to be 1.6% lower year on year and 16.3% below the peak:
Source: Cotality (May 2025)
The next chart from Cotality shows the declines from peak across the major centres:
Source: Cotality (May 2025)
Auckland (-21.4%) and Wellington (-23.9%) have led the decline in New Zealand house prices.
The construction side of New Zealand’s housing market has also crashed, as illustrated below by Justin Fabo:
Major bank ASB commented that “we’d be remiss if we didn’t state that construction activity has been surprisingly frail”, which seems like an understatement given the 2.25% of monetary easing delivered by the Reserve Bank of New Zealand.
Falling house prices and mortgage rates have significantly improved affordability, which should have stimulated demand, prices, and construction activity.
Mortgage repayments as a percentage of household income have declined from about 50% to just over 35%.
Cotality NZ Chief Property Economist Kelvin Davidson said that while “lower mortgage rates are clearly going to be bolstering households’ confidence as well as their wallets”, there are “restraints on buyers’ willingness to push ahead with property deals or to pay higher prices”.
Therefore, “anybody who was anticipating a sharp or widespread increase in property values as we got further into 2025 continues to be disappointed”.
The upshot is that home buyers in New Zealand are in the box seat, with vendors cutting prices and mortgage rates falling.
