NZ House Prices Flatline, But Modest Growth Ahead?

New Zealand's house prices have been relatively flat since 2023, with the national average property value in August sitting just below $800,000, a decline of 1% from a year earlier. This is getting close to being the longest period of flat house prices NZ has ever had.

Peter Nicholl notes that while some might see this as bad news, it's actually a positive development for society and the economy. House values are now getting back closer to what is regarded as an affordable level, five or six times the average income. As a result, the number of house sales to first-home buyers has started rising again, reaching 27.7% last year.

The surge in house prices in 2020 and 2021 was not 'artificial', but unsustainable. The current level of house prices is about 15% above the level at the beginning of 2020, an increase of about 2.5% a year.

Nicholl warns that New Zealand needs to avoid a repeat of the boom and bust cycles of the early 2020s, which were financially disastrous for some people and had major social consequences. The RBNZ should not keep interest rates too low for too long again, and instead aim for modest price rises at around the rate of inflation.

The forecasts for house price changes are mixed, with the RBNZ predicting a further 1% fall in 2027, commercial bank economists expecting 2-5% growth, and the NZ Treasury forecasting 6-7% annual increases from 2027-2030. Nicholl thinks the bank economists' predictions have been somewhat closer to the mark, calling for modest growth in house prices over the next year.