Photo: RNZ
Property values continued to dip last year, but lower mortgage interest rates and signs of an economic recovery point to a possible change of direction for 2026.
Despite gains early in 2025, house values fell in seven of the past nine months, falling 1 percent nationwide according to property data firm Cotality NZ's latest Home Value Index (HVI).
The median house price is now $808,430 - only a slight change from a year ago, but a drop of -17.6 percent from the 2022 peak, HVI figures showed.
Kelvin Davidson, Cotality chief property economist, said it had been a "year of conflicting forces", with multiple factors pulling in different directions to leave values broadly flat.
Increased property listings and the weak economy offset lower mortgage rates, while increased housing stock further moderated values, he said.
Some areas reached new peaks, especially in provincial markets - Southland hit record median values in December, and places like New Plymouth and Queenstown saw increases, reflecting wider economic factors including strong farming returns, he said.
"Property in provincial towns and cities ... has been more resilient. I wouldn't say it's booming, but it definitely hasn't fallen as far as other parts of the country and it perhaps showed a bit of renewed growth."
Auckland and Wellington 'subdued'
Auckland and Wellington's markets remained weak, with the decline from the heady highs of 2022 exceeding 20 percent.
"What goes up must come down. There were big booms in Auckland and Wellington - and elsewhere too, of course, but housing affordability did get pretty stretched in those markets."
Prices fell by 0.2 percent nationally last month. Auckland remained sluggish (down 0.6 percent), as part of an overall drop of 2.6 percent for the year. Hamilton was down 0.7 percent (a 1.2 percent annual change), Wellington fell by 0.4 percent in December, a 2 percent annual drop.
Meanwhile, Christchurch recorded a modest 0.2 percent rise in December and an annual increase of 2.6 percent, while Tauranga, New Plymouth and Dunedin all increased by 0.5 percent in December (1 percent, 0 percent and -0.3 percent annual change respectively).
The supply of townhouses had dampened prices to an extent in Auckland, while the impact of large scale job losses in the public service resonated in Wellington, with the underlying economy "subdued" in both cities, he said.
"Wellington's still got that public sector malaise going on. You walk around central Wellington and the mood's perhaps a bit downbeat - reflecting public sector cutbacks, tight budgets - the central city is battling along."
The median house price in Auckland was $1,047,044, followed closely by Tauranga on $935,174, Wellington's median was $785,790, Hamilton's $717,495, the median value in Christchurch was $683,360 and Dunedin's $612,171.
Auckland remained "a key weak spot", with each of its sub-markets underperforming the national average.
North Shore, where values had dropped 18.4 percent since 2022, was the only part of Tāmaki Makaurau where median values had fallen less than 20 percent since the peak.
Wellington's sub-markets, such as Hutt Valley, Porirua and Kāpiti Coast, also took steep hits, dropping 23 percent or more from the 2022 peak.
Election year uncertainty around regulation - including loan-to-value and debt-to-income ratios - and talk of a capital gains tax could see prices remain muted, Davidson said.
Cotality chief property economist Kelvin Davidson. Photo: SUPPLIED
Provincial prices prove punchier
Prices in the provinces and the southern reaches of the country were more resilient.
The Southland region's three districts had seen median values peak in December - Southland was up by 0.5 percent to an average median house price of $597,000, Gore was up 0.6 percent to $448,432, and Invercargill increased 0.5 percent to $520,464.
Parts of Canterbury also edged to new records.
Davidson said there was not a dramatic split between property value performance in main centres versus the provinces, but "there's no doubt that the general vibe is still stronger in say Invercargill or New Plymouth versus Auckland or Wellington".
The proposed overhaul of the Resource Management Act could reinforce a shift in supply, with the townhouse construction pipeline ramping up in some areas, he said.
While there could be pockets of oversupply, mostly increased supply was reducing pre-existing shortfalls.
"It's not caused us to go into oversupply, it's really just reducing under-supply ... we need more dwellings of all different types to cater for changing societal needs, smaller households and those sort of things."
Further, intensification and increased supply in Auckland and Christchurch were helping to keep a lid on prices, he said.
Cautious optimism as cost of living stifles confidence
Davidson said the outlook for this year was cautiously optimistic - the report forecast a potential 5 percent rise in property values, as people refixed mortgages and the economy showed signs of recovery.
"You're looking at 40 to 50 percent of mortgages going to see a rate change pretty shortly and it should be downwards - that cash will start to come through.
"On the other side, you have to acknowledge inflation. The rate of change of prices might have slowed down, but that doesn't mean prices are falling or things are suddenly cheaper - it still costs a lot to live.
"It takes a little bit longer to feed through into growth in the overall economy, because people are battling to keep up with day-to-day necessities."
Davidson was confident the economic recovery would eventuate, with the September quarter showing 1.1 percent GDP growth.
The "largest macro headwind" was the sluggish labour market.
A drop in unemployment would do the most to give people more confidence, as even those unaffected by redundancies were likely to be cautious about spending if those around them were losing their jobs.
"All in all, 2026 may well be a stronger year for the housing market than 2025 - despite the headwinds. It's the year of rebuilding confidence," Davidson said.
In 2024, prices dropped by 3.9 percent on the previous year.
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