New Zealand Housing Market: Signs The Tide Is Turning
- Staircase Financial
- 3 days ago
- 3 min read
ON THE MARKET – August 2025 Edition
After several challenging years, New Zealand’s housing market is showing the first clear signs of a turnaround. While prices have dropped from their late-2021 peak and after some recovery have largely tracked sideways, a convergence of falling interest rates, policy shifts, and resilient demand has sparked cautious optimism recently among leading experts and commentators.
Optimism from Market Leaders
Former Prime Minister Sir John Key recently urged the Reserve Bank of New Zealand (RBNZ) to make a bold 1% cut to interest rates, arguing that the real driver of economic recovery is a confident, active housing market. “If you want to get things going, the core of what’s wrong is the housing market,” Key emphasized, linking rising property values with improved consumer and business confidence.
Renewed housing momentum can restore New Zealand’s “wealth effect,” boosting spending and investment throughout the economy. - Sir John Key
Kiwibank’s chief economist Jarrod Kerr echoes this optimism, noting that while the global outlook remains “murky”, New Zealand’s property market is positioned for growth as rates drop and lending conditions improve.
Kerr forecasts a 2–3% rise in national house prices by late 2025, with stronger growth (5–7%) expected in 2026 as market momentum builds. “We are optimistic,” he says, “that the second half of this year and into next will be much better.”
Richard Prebble, former minister and commentator, supports Key’s call for rate cuts while urging policymakers to go further. The Taylor Rule that central banks use to guide interest rates indicates NZ’s OCR today is 0.5% too high.
Falling Interest Rates & Policy Shifts
Interest rates are now firmly on a downward trend. The Reserve Bank has slashed the Official Cash Rate (OCR) by 2.25% since August 2024, and financial markets expect more cuts, potentially reaching 2.5% next year.
Mortgage rates have already dropped significantly from their peaks, easing pressure on both borrowers and prospective buyers. Key, Kerr and Prebble all advocate moving quickly on rate cuts, seeing cheaper borrowing as the key to reviving confidence and unlocking demand.
Policy is also shifting decisively in favour of property investors. Recent government moves have restored interest deductibility on investment properties and shortened the bright-line capital gains tax test from 10 to 2 years.
Mortgage lending restrictions have also eased. This is already “helping calm the investor community,” according to Kiwibank, after years of feeling “hunted” by earlier policy. With the return of investors and easier credit, more market activity and price stability are expected.
Strong Demand & Rising Construction
Population growth and migration continue to underpin demand. Despite a net loss of Kiwis to Australia, strong immigration and new “golden visa” policies for investors ensure a steady flow of new residents seeking homes.
This demand, combined with a recent uptick in housing inventory and a gradual lift in new building consents, is helping to stabilise the market.
While construction activity slowed in response to higher interest rates, banks and developers are increasingly confident that the worst is over. With credit becoming more accessible and buyer interest returning, the pipeline of new builds is expected to grow through 2025 and beyond.
The Return Of Mum and Dad Investors
Evidence is mounting for the return of property investors to the market in some strength.
Evidence like mortgage borrowing by investors which has surged since the beginning of 2025 as more investment properties are being purchased.
Data shows that 35.6% of investment properties are now being purchased by multiple property owners, with 23.4% using mortgages and 12.2% buying with cash.
What the Future Holds for NZ Property
While no forecast is risk-free, expert consensus suggests the worst is over. A combination of falling interest rates, supportive government policies, strong migration, and growing investor confidence is laying the groundwork for a housing market recovery.
Both Key and Kerr agree and the emerging statistics back up that view.
New Zealand’s property market is set for a new growth phase, presenting opportunities for both investors and first-home buyers to plan their next move.
Whether you're a first-home buyer, seasoned investor, or just exploring your options, now is the time to get ahead of New Zealand’s shifting housing market.
Talk to the team at Staircase today and explore how falling rates and fresh opportunities could work for you.
