New Zealand Home Prices Predicted to Rebound 5% in Two Years: Reuters Poll Analyzes Housing Recovery

Home prices in New Zealand are forecast to rise 5% by 2026, according to a Reuters poll. Experts suggest interest rate cuts will drive buyer demand, but rising rents and affordability concerns remain key obstacles for prospective homeowners.

Rate Cuts Boost New Zealand Home Prices

After a 19% correction in the market due to the pandemic, a Reuters survey of housing experts predicts that home prices in New Zealand will rise about 5% in the next two years due to reduced loan rates boosting demand again.

House prices in this market have climbed double in the past seven years, reaching a high in late 2021, and experts predict that average rent hikes will outstrip consumer inflation. This bodes poorly for would-be homeowners whose budgets are already feeling the pinch.

Rising unemployment and a severe economic downturn hit household incomes hard, but the Reserve Bank of New Zealand (RBNZ) has slashed interest rates 125 basis points so far, and additional cuts are predicted next year, so there is reason to be optimistic.

Reuters Poll Projects 5% Home Price Growth

The consensus projection from a survey of ten property market analysts conducted on November 12–28 predicted that average home prices will grow 5.1% in 2025 and 2026, following an expected 0.3% decline this year.

House price growth projections from RBNZ for 2025 and 2026 are approximately 4% and over 7%, respectively, according to the most recent Reuters poll. Buyers rushed to purchase homes with bigger square footage, driving up home prices by 40% during the pandemic.

"For now, the housing market's animal spirits appear to be sleeping, but anecdotes suggest buyer interest has picked up meaningfully since the RBNZ started cutting...which is perhaps a signal that there might be a 'buy the dip' mentality forming," Sharon Zollner, chief economist at the Australian National Bank.

Despite entering a technical recession towards the end of last year, New Zealand's economy is anticipated to recover in 2019 thanks to reduced interest rates.

Affordability Challenges Loom Over First-Time Buyers

But many would-be first-time owners may be stuck renting if income growth slows down. In Auckland, the biggest city in New Zealand, the average property price is ten times more than the typical household income, while the national average is roughly seven times higher.

"With falls in borrowing costs, the housing market will be more accessible for first home buyers. However, high house prices and the required level of deposits will still be a hurdle for purchasers," stated Satish Ranchhod, a senior economist at Westpac.

A smaller group of economists predicted a 3.5% increase in urban home rents over the next two years, which would be more than the 2.0% increase in consumer price inflation predicted in a separate Reuters poll (via Investing.com).

Nearly half of the experts polled predicted an improvement in first-time homebuyers' affordability in the next year, while the other third predicted a worsening.

Equity Owners Stand to Gain Most

A common thread running through Reuters' surveys of different housing markets is that individuals who own a property or have established substantial equity would continue to reap the benefits of the market, even if it does improve.