The Recovery is Real and It’s Only Just Getting Started
- Staircase Financial
- 2 days ago
- 4 min read
ON THE MARKET – October 2025 Edition
After three years of headwinds, New Zealand’s residential property market is finally firing on all cylinders. With the Official Cash Rate now cut to 2.5 percent, fixed mortgage rates down to 4.49% with the expectation of further cuts within the next 3-6 months (mortgage rates could fall to 4%), and the economy showing early signs of expansion, the next upswing has clearly begun.
That upswing is yet to translate into higher property prices, but one thing is certain, it’s just a matter of when that occurs, not if.
Across Auckland, Tauranga and Queenstown, momentum is building. CBRE’s latest Q3 Valuer Survey shows the number of valuers reporting strong demand has tripled since early 2025, and all now expect price rises in the year ahead.
That confidence, coupled with falling interest rates, is setting the stage for a genuine market lift.
Affordability Surges to Best Level in Years
The Staircase Affordability Index (SAI) now sits near its most favourable reading since 2019. With mortgage rates back in the mid 4% range, the typical household’s mortgage repayment share of income has dropped by more than 20 percent from last year’s peak.
First home buyers are seizing the moment, investors are returning, and those who postponed purchasing in 2023 and 2024 now find they can afford more so are coming back in play.
Cotality’s latest data shows upgraders, those homeowners trading up to larger or lifestyle homes, fell to just 25 percent of sales this year, down from 30 percent in 2021. That gap represents enormous pent up demand by upgraders waiting to improve their lifestyle once job security and confidence firm.
As employment and consumer spending improve, expect a wave of upgraders back in the market and with them, stronger sales volumes and rising prices.
The Property Market Tide is Turning
There is now the real potential for a tsunami of property price growth as we move through the recovery phase of the property cycle and into the next boom.
When the tide goes out big, like it has on the property market since 2022, it comes back in big too. An “unusually low tide” in the property market (weak sentiment, credit constraints, low sales volumes) typically precedes a major upswing in both volumes and prices.
That tide is now turning.
The last four New Zealand property cycles provide a rich source of valuable insights into the market’s nuances, which indicate what is in store for property values.
For example, whenever there is a financial crisis, a crisis of confidence or a credit crunch, then repetitive property market trends emerge. These trends reveal crises typically result in extremely low levels of property sales volumes and subsequent value falls.
However, once the crisis has dissipated then sales volumes, and prices, bounce back to their former peak levels within a few years.
Property market recoveries are usually rapid, and a stampeding herd of potential property buyers is always difficult to curb.
Auckland, Tauranga and Queenstown Leading the Charge
Auckland: Inventory remains high but choice and competition are spurring renewed buyer activity. As listings tighten, price growth is likely to turn sharply positive through 2026.
Tauranga: Lifestyle migration continues to underpin values while limited new stock supports gradual appreciation.
Queenstown: Supply is tight and demand resilient. High end buyers and accommodation investors are returning in force, with CBRE valuers noting the region’s market is already starting to feel bubbly.
Staircase expects that once the recovery gains full traction, double digit annual value growth could well re-emerge in some of these regions.
Confidence is the Catalyst
Falling mortgage costs are freeing up household budgets, driving spending, hiring, and ultimately wage growth. That virtuous cycle fuels confidence, which in turn inspires homeowners to upgrade.
After years of holding back, many New Zealanders are ready to improve their lifestyle, buy the bach, upgrade the car, or invest in a better family home.
As this confidence effect spreads, demand will broaden well beyond investors and first home buyers. Emotional purchasers competing for quality homes are less price sensitive, and that is when prices move fastest.
Investor Outlook: The Perfect Alignment
The fundamentals that typically precede a powerful property cycle upswing and property price surge are aligning:
Falling interest rates mean cheaper credit and stronger borrowing power.
Improved affordability with the Staircase Affordability Index trending at five year highs.
Tightening supply as consent volumes remain one third below 2022 peaks.
Rising confidence with sales volumes up and days to sell down.
The Staircase View
All indicators suggest the recovery has legs and could soon accelerate. Sales volumes are expected to strengthen through 2026 as upgraders and investors re-engage, supported by a broader lift in consumer confidence as lower rates drive spending and job creation.
This next phase will reward those positioned early, it always does. Investors and homeowners who act now will benefit most as competition heats up and opportunities tighten.
Next Steps
Now is the time to reassess your position:
Review your borrowing power under new test rates.
Explore high growth areas within Auckland, Tauranga and Queenstown.
Buy now and lock in at today’s low fixed rates before the herd catches up.
After years of challenge, optimism is back and it is grounded in data, not hype. With rates low, affordability intact and about to improve more on the back of lower mortgage rates, and confidence returning, the foundations for the next major property upswing are already in place.
The tide has turned. Let’s climb together. Step up with Staircase.
