Reuters poll predicts New Zealand home prices to rise by 5% in 2025
New Zealand’s housing market is poised for a modest rebound in 2025, driven by falling interest rates, according to a Reuters poll of property experts.
Home prices are projected to rise by 5% this year after a nearly 20% drop from their late 2021 peak.
While the decline eased some affordability pressures, it only offset half of the more than 40% surge experienced during the pandemic.
Lower rates are now expected to make one of the most expensive housing markets among OECD countries slightly more affordable.
Interest rates key to market recovery
The Reserve Bank (RBNZ) has cut interest rates by 175 basis points since August, providing much-needed support to the housing market.
This policy shift is expected to fuel price growth, with average home values projected to increase by 5% in 2025 and 6% in 2026, according to the median forecast from a February 17-26 survey of 12 property market analysts.
The New Zealand housing market is showing signs of recovery, with property sales rising from 59,000 in mid-2023 to nearly 71,000. Economist Tony Alexander noted that the Reserve Bank’s recent 50 basis point cut to 3.75% is expected to boost the sector, although price gains have been modest at about 2.5% since mid-2023.
CoreLogic also reported early signs of recovery in New Zealand’s housing market in 2025, with chief economist Kelvin Davidson attributing the gradual improvement to recent mortgage rate cuts.
“We see a bit more potential upside in the market this year given mortgage rates are falling faster and probably by more than we had been anticipating three to six months ago, but not by a great deal,” said Gareth Kiernan (pictured), chief forecaster at Infometrics. “Interest rates will still be a reasonably important driver.”
RBNZ is anticipated to cut rates by another 75 basis points this year, bringing the cash rate down to 3%, which is likely to sustain the recovery in housing prices.
Affordability outlook for first-time buyers
Although home prices are expected to rise, affordability may improve slightly for first-time buyers due to falling interest rates.
In the Reuters poll, 10 out of 11 analysts identified lower interest rates as the primary driver for price growth, with one expert pointing to a widening gap between housing demand and supply.
However, challenges remain. Slow wage growth and high unemployment rates continue to impact buying power, Reuters reported.
According to the Real Estate Institute of New Zealand (REINZ), the average asking price for a property was $750,000 ($427,575) in January, which is roughly six times the average household income and seven times in Auckland, the country’s most expensive city.
Affordability remains a long-term challenge
Experts cautioned that while lower interest rates may provide temporary relief, overall affordability remains a concern.
“The housing market has been subdued over recent years and so there is scope for a recovery. However, once that recovery builds… affordability will remain a constraint on house price growth moving forward into the medium term,” said Henry Russell, economist at ANZ.
“Yes, affordability has improved relative to where it was, but in an absolute sense house prices remain very unaffordable for New Zealanders.”
Cautious optimism amid economic uncertainty
Despite the optimistic forecast, the economic backdrop remains challenging.
New Zealand’s economy is still in recession, which could dampen the housing market’s recovery momentum.
Analysts are cautiously optimistic, acknowledging that while price growth is expected, it will be modest and largely dependent on continued interest rate cuts.
As New Zealand’s property market navigates these dynamics, buyers and sellers alike will be closely watching RBNZ’s policy decisions and their impact on affordability and market activity.
