Brought to you by Senior Research Analyst Wayne Shum
State of the nation: an overview of the New Zealand property market for the three months ending February 2025
Following the recovery momentum observed in late 2024, the national housing market slowed in February. The national Valocity Value index increased by 0.6% compared to November 2024 but experienced a slight decline of 0.3% from January 2025. At the end of February 2025, the index is down by 1.1% for the year.
The Reserve Bank of New Zealand implemented the widely anticipated 0.5% Official Cash Rate (OCR) reduction in February, bringing the rate to 3.75%. This adjustment aligns with inflation returning to the mid-target range, and the RBNZ has signalled further OCR cuts throughout 2025. These future cuts are expected to occur in incremental steps of 0.25%, potentially lowering the OCR to approximately 3.1% by the end of 2025. The OCR is projected to remain at this level through 2028. While these reductions are expected to influence shorter-term mortgage rates, the RBNZ cautioned that longer-term mortgage rates are unlikely to experience significant further declines.
Retail mortgage rates have continued to fall, helping to restore some purchasing power lost since 2021. However, while mortgage rates are a key market driver, other factors crucial to a strong price recovery remain subdued. The national unemployment rate has increased to 5.1%, net migration has slowed, and GDP growth remains weak.
Furthermore, the RBNZ has revised its house price growth forecast for the year to 3.8%, a significant deviation from the 5-7% growth forecasted by major banks. The RBNZ projects that annualised house price growth will peak in mid-2026 at 5.2%, down from the 7% previously forecasted in November 2024.
While reductions in mortgage rates are expected to benefit borrowers, the full impact will take time. Approximately 70% of all mortgage lending rates are due for refixing within the next 12 months. It is also important to note that some loans originating in 2021 may be refixed at higher rates.
The RBNZ’s introduction of the Debt-to-Income (DTI) ratio in 2024 will likely constrain the pace of housing value recovery as rates continue to decline. As a result, a rapid price rise akin to that observed in 2020 and 2021 is unlikely.
Regional housing market performance showed variability over the summer months. Seven out of the 16 regions experienced a quarterly decline in property values. Auckland continued to recover in the past quarter, with values rising by $16,000. However, areas such as Canterbury, Hawke’s Bay, Northland, Waikato, and Wellington experienced declines in property values.
Figure 1: Valocity Value Index and one-year fixed rate
Figure 2: Valocity value and rate of change – New Zealand
| Value now – New Zealand | Value – three months ago | Quarterly change | Quarterly change – three months ago | Value six months ago | Value one year ago |
| $967,000 | $961,000 | 0.6% | 0.4% | $958,000 |
$978,000
|
The national median sales price fell to $780,000 in Q4-2024 from the same period in 2023, but up from $770,000 in Q3-2024. A sustained price recovery requires a consistent rebound in sales volume, which has not yet materialised. Potential buyers did not feel the urgency to act, and investors remained on the sidelines.
Figure 3: Median sales price and quarterly volume (settled sales only)
Net migration continued the downward trend and ended 2024 at 27,092, a level last seen at the beginning of the 2010s. This, in effect, reduces the demand for properties, affecting the rental and the sale market.
Figure 4: Net migration – Stats NZ
The mortgage landscape
Mortgage rates continued to decrease throughout 2025, with a reduction in lenders’ test rates. While this has alleviated some pressure on existing borrowers, it has not yet been sufficient to stimulate potential buyers in the market significantly. The relief from declining rates has primarily benefited current homeowners and borrowers.
As of December 2024, over 70% of outstanding fixed-rate lending was due for refixing within the next 12 months, with 43% set to be refixed in the next six months. In addition, the proportion of lending on floating rates increased slightly, rising from 10.2% in December 2023 to 11.4% at the close of 2024. These trends indicate that borrowers are positioning themselves to benefit from further rate reductions, with many opting for shorter-term fixed-rate options to capitalise on anticipated rate adjustments.
First-home buyers accounted for 40.4% of mortgage registrations over the past three months, a slight decrease from 42.8% in the preceding quarter. Investors’ shares remained relatively stable, seeing a minor decline from 24.7% to 24.5%. However, the proportion of mover and multi-homeowner buyers increased in the last quarter. The reduced competition in the market, driven by softer demand from other buyer groups, has enticed these segments to expand their presence in the housing market.
Construction
Building consent volumes have continued to decline in recent months. In the 12 months leading up to December 2024, 33,600 new homes were consented, representing a 9.8% decrease compared to the previous year. This decline reflects a broader trend in the housing sector, with fewer new developments gaining approval.
A notable shift has occurred in the composition of newly consented homes. After a period of townhouse developments dominating the market, there has been a return to freestanding homes in recent months. This preference change suggests a potential shift in housing demand, with a surplus of townhouse developments across the main centres.
Auckland’s housing market faces additional challenges due to infrastructure constraints. In November 2024, Watercare published a map outlining the network constraint faced by the city and the estimated completion date for the capital works required. This announcement is expected to hinder new home development further in parts of the city, exacerbating existing supply pressures in one of New Zealand’s largest housing markets.
Building costs have largely stabilised after the significant increases experienced during the COVID-19 era. However, the cost of imported materials is expected to rise due to the weakening of the New Zealand Dollar. This increase in material costs could place additional pressure on developers and homebuilders, potentially affecting the affordability and liability of new housing projects. The slowdown in Building Consent also means lower workloads for the building sector, with some of the workforce relocating to Australia.
Figure 5: Composition of new homes consented – Stats NZ
Things to watch
The pace of the economic recovery expected over 2025-2026 will affect buyer confidence. Some potential buyers may remain on the sideline until the economic condition improves.
Inventory levels remain high and show little sign of diminishing; this indicates sellers are active, placing a natural ceiling to price growth.
The shortfall between yield and mortgage rate is narrowing, coupled with the stabilising of values, it will soon be viable for investors to return in some regions.
Valocity values
|
Region |
Value now |
Value – three months ago |
Quarterly change |
Quarterly change – three months ago |
Value six months ago |
Value one year ago |
|
Auckland |
$1,303,000 |
$1,287,000 |
1.2% |
0.9% |
$1,277,000 |
$1,330,000 |
|
Bay of Plenty |
$959,000 |
$944,000 |
1.6% |
-0.6% |
$952,000 |
$967,000 |
|
Canterbury |
$787,000 |
$789,000 |
-0.3% |
1.0% |
$782,000 |
$786,000 |
|
Gisborne |
$668,000 |
$654,000 |
2.1% |
-0.9% |
$665,000 |
$670,000 |
|
Hawke’s Bay |
$790,000 |
$791,000 |
-0.1% |
1.4% |
$781,000 |
$803,000 |
|
Manawatu-Whanganui |
$600,000 |
$601,000 |
-0.2% |
0.5% |
$603,000 |
$606,000 |
|
Marlborough |
$752,000 |
$753,000 |
-0.1% |
-2.3% |
$772,000 |
$761,000 |
|
Nelson |
$813,000 |
$807,000 |
0.7% |
-0.7% |
$814,000 |
$804,000 |
|
Northland |
$814,000 |
$821,000 |
-0.9% |
1.1% |
$817,000 |
$834,000 |
|
Otago |
$993,000 |
$990,000 |
0.3% |
0.4% |
$987,000 |
$970,000 |
|
Southland |
$545,000 |
$539,000 |
1.1% |
-0.9% |
$548,000 |
$533,000 |
|
Taranaki |
$701,000 |
$692,000 |
1.3% |
-0.3% |
$696,000 |
$691,000 |
|
Tasman |
$949,000 |
$933,000 |
1.7% |
-2.8% |
$962,000 |
$934,000 |
|
Waikato |
$903,000 |
$908,000 |
-0.6% |
0.9% |
$900,000 |
$911,000 |
|
Wellington |
$859,000 |
$864,000 |
-0.6% |
-1.0% |
$875,000 |
$904,000 |
|
West Coast |
$485,000 |
$475,000 |
2.1% |
2.6% |
$466,000 |
$451,000 |
On the horizon
- Residential lending data – RBNZ – 27th and 28th February
- Gross Domestic Product (GDP) – Stats NZ – 20th March
- April Monetary Policy Review – RBNZ – 9th April
- Consumer Price Index (CPI) – Stats NZ – 17th April
- Financial Stability Report – RBNZ – 7th May
- Unemployment Rate – Stats NZ – 7th May
- Queenstown-Lakes District Council General Revaluation – March (Tentative)
- Auckland Council General Revaluation – May (Tentative)
For further information, or if you would like to understand more about New Zealand housing market insights please contact wayne.shum@valocityglobal.com.