NZ House Prices May Not Recover Until 2030 Amid Shift in Market Dynamics

ASB's latest housing outlook suggests that New Zealand house prices may not fully recover until 2030, nearly a decade after their peak in 2021. According to the bank, national house prices are still around 15% below their late-2021 peak in nominal terms and roughly 30% below that peak once inflation is taken into account.

The forecast indicates that homeowners who bought near the top of the market may have to wait up to eight years just to see the national market return to the price level they bought into. However, even then, the property's value in real purchasing-power terms could be significantly lower due to inflation.

ASB attributes this slow recovery to several factors, including a weakening demographic tailwind, increased supply of housing choices, and moderating population growth. The bank also notes that interest rates have largely run their course, which previously fueled the housing boom by allowing buyers to borrow more. As a result, future capital growth may become slower and more closely tied to household incomes.

This shift in the property market could change the way investors assess residential investments, making rental income, maintenance, insurance, rates, tax settings, mortgage costs, and vacancy more important factors. While this may be bad news for existing owners, it could also improve affordability for young buyers who no longer face the same terrifying equation of buying immediately or being priced out.