By Veronica Dudei Maia Khongwir
BENGALURU (Reuters) -New Zealand home prices will rise slower than previously expected through 2027 as a fragile economy weighs on buyer confidence despite aggressive monetary policy easing, a Reuters poll of property analysts showed.
To revive an economy that slipped into recession last year the Reserve Bank of New Zealand (RBNZ) has slashed interest rates by 250 basis points since mid-2024 to 3.00% at its August meeting and also surprised markets by signalling more cuts by year-end.
However, lower rates haven’t sparked a rebound in housing demand like in neighbouring Australia. Rising unemployment has kept household spending and sentiment subdued, squeezing budgets particularly for first-time buyers in one of the OECD’s priciest housing markets.
Average home prices were forecast to rise 1.3% this year, according to the median forecast of 12 property analysts in the August 18-September 11 Reuters poll. That is around a third of the 3.8% rise predicted in a June survey and far below the 5.0% projection made in February.
“We’ve already got eight months of the year and house prices have basically gone nowhere. The market is remaining flat. So it’s not leaving much of the year to get up to a 5% figure that I might have had previously,” said Kelvin Davidson, chief property economist at Cotality.
He added while lower mortgage rates provide support, confidence remains weak and “unemployment has gone up…so those things have been limiting house price growth throughout the year.”
Home prices were expected to rise 5.0% in 2026 and 4.3% in 2027, down from 6.0% and 5.1% expected in the June survey, suggesting a gradual recovery rather than a sharp rebound.
While home prices may receive some support from lower mortgage rates, the damage from the last downturn still lingers. From a peak set towards the end of 2021, prices had fallen nearly 20% by late last year yet that correction only partly offset the 40% surge during the pandemic, leaving many first-time buyers priced out.
Mortgage rates have eased more than 20% from highs a year ago but affordability remains a significant hurdle with homes still costing roughly six times the average household income.
The national median house price stands at NZ$767,250, while in Auckland it is nearly 30% higher at NZ$975,000, according to the Real Estate Institute of New Zealand (REINZ).
With RBNZ expected to cut rates by a total of 300 basis points in this easing cycle, nine of 10 analysts in the poll said purchasing affordability for first-time buyers will improve while one said it would worsen.
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