NZ House Prices May Not Recover Until 2029

New Zealand house prices may not recover to their 2021 highs until as late as 2029, according to ASB Economics. The bank's senior economist Mark Smith notes that the housing market has entered a structurally different phase, rather than just experiencing a temporary downturn.

The previous three-decade run of strong house price gains averaged around 6% a year and was driven by factors such as falling mortgage rates, a positive population-price relationship, and constrained housing supply. However, these drivers are now shifting in the opposite direction, with rising interest rates, lower migration inflows, and increased dwelling supply.

ASB expects no change in house prices this year, followed by a modest 3.5% rise in 2027. The bank's forecast suggests that it may not be until late 2029 that nationwide house prices approach their late-2021 peaks on a nominal basis.

The Reserve Bank's latest forecasts are also in line with ASB's view, projecting nationwide prices to still be around 4% below late-2021 levels by mid-2029. Rather than a repeat of debt-fuelled booms, ASB expects any recovery to be led by household income growth rather than borrowing.