Source: ASB Bank Limited
- National house prices remain around 15% below late 2021 peaks, and roughly 30% lower after adjusting for inflation.
- ASB expects a more moderate, income-led recovery, with 2021 nominal house price peaks unlikely to be reached again until late 2029.
- The outlook has implications for household spending, inflation pressure and the OCR.
New Zealanders waiting for house prices to bounce back to 2021 highs may need to be patient, with new ASB analysis pointing to a more measured recovery led by household incomes rather than the borrowing-led booms of the past.
ASB Senior Economist Mark Smith says the market has reset sharply since its 2021 peak, with national house prices still around 15% lower in nominal terms and roughly 30% lower after inflation.
“While affordability has improved, the market just hasn’t taken off,” says Mr Smith. “Buyers have more time and choice than they did during the last upswing, while sellers may need to keep expectations realistic. We aren’t forecasting a return to the rapid capital gains of the past decade.”
As well as some cyclical factors that have weighed on New Zealand house prices, ASB’s ‘NZ House Price Outlook’ report identifies three structural forces that are likely to promote a more balanced housing market: a potential end to trend declines in mortgage interest rates; demographic trends that are expected to moderate future population growth; and the jump in multi-unit dwelling supply that is giving buyers more options, particularly through townhouses, apartments and retirement village units.
“This is good news for first-home buyers, who made up 29% of the market in July*, and those trading up, but it also means sellers should be prepared for a more balanced market,” says Mr Smith. “House prices will still rise, but we expect the recovery to be more measured, more income-led and ultimately more sustainable.”
ASB expects national house prices to be broadly unchanged over 2026, rise around 3.5% in 2027, then grow more in line with household incomes. On that track, late 2021 nominal price peaks may not be reached again until around late 2029.
The outlook differs by region. Auckland and Wellington have seen larger falls since the peak, while Christchurch has been more resilient, helped by a stronger regional economy and internal migration.
The analysis also points to a changing link between housing and the broader economy, with house prices and household spending more likely to be driven by income growth than by rapid wealth gains from rising property values.
“An income-led upswing should reduce the risk of economic overheating and support a more balanced expansion which could in turn see a more gradual monetary policy tightening by the RBNZ,” says Mr Smith. “But there is still uncertainty. If the housing market surprises on the upside, the OCR could need to move above our current 3.25% peak view in 2027.”
ASB will watch the labour market, migration, credit growth, construction costs, regulatory settings and rents for signs the housing market is either gaining momentum or remaining subdued.