2024 was a pivotal year for house prices in NZ, marked by challenges such as increased housing supply, declining prices, and rising unemployment. But what does 2025 hold?
This article will guide you in confidently predicting the 2025 NZ house prices.
We’ll break down the five variables influencing NZ house prices and provide actionable insights to help you anticipate future trends. By understanding these factors, you’ll be better equipped to navigate the property market.
We hope this article becomes a trusted resource you can revisit regularly for updates and the latest market insights.
Why should you listen to Najib Real Estate?
When banks and economists predicted an 8% increase in New Zealand house prices in 2024, we took the opposite stance. Our forecasts aligned with what actually happened, proving the reliability of our methods. We regularly share updates with over 1,000 subscribers on our YouTube channel.
What are the bank's forecasts for 2025?
Today, the banks forecast a 7% increase in median house prices for 2025. Let's see what happens...
As real estate agents, we’re on a mission to change the negative perception that agents can’t be trusted. The advice we share here is the same advice we give to our clients—transparent, data-driven, and always in your best interest.
The real estate industry needs a shift, and we’re committed to leading that change. Join us in 2025 as we continue to deliver on that promise.
Critical thinking is your best ally in real estate. It allows you to sift through opinions, data, and forecasts to form conclusions.
Always ask these questions:
This approach will help you confidently navigate the New Zealand real estate market.
Accurately forecasting house price direction requires analysing five core variables. Understanding how these factors correlate will help you confidently predict the NZ housing market.
Lets' begin with analysing what happened with the Median Sale Prices in New Zealand.
The median house price NZ reflects the middle value of home sales and is a cornerstone of real estate analysis. Over time, fluctuations in this metric can reveal broader economic trends.
NZ inflation has eased in recent years, with the market correcting to more sustainable levels. However, as shown in the NZ house prices table below, historical data illustrates that house price growth often exceeds a healthy growth rate of 2-4% per year.
In recent years, many Kiwis have been unable to afford to buy or retain their properties. As a result, house prices in New Zealand have dropped this year. Prices dropping is a positive step towards bridging the gap between affordability and house prices, largely due to the National Government’s focus on reducing inflation and Debt-to-income (DTI).
However, the key question remains: Are New Zealand house prices now at a level that Kiwis can afford?
The data in this article suggests the answer is no. This is why we believe there may be further price declines in 2025 before the market stabilises and begins to grow.
Note: Data doesn’t always tell the true story, and we have been seeing houses sell for 10-15% lower than their prices achieved in the 2022 peak. Always consult with an expert to get the true story of what’s happening in the New Zealand Real Estate market.
Another crucial indicator is the number of homes sold annually. Historical data often reveals patterns in buyer behaviour and market dynamics.
Understanding these trends can help buyers and investors decide when to enter or exit the market.
In 2024, the NZ housing market saw a decline in transactions despite an increase in housing supply. This reflects the National Government’s focus on reducing inflation, leading to reduced demand and lower house prices in NZ.
This trend can be attributed to the National Government’s efforts to reduce inflation, which had several consequential effects. Notably, interest rates spiked, leading to higher mortgage costs. This increase made borrowing more expensive, prompting some homeowners to sell their properties.
Simultaneously, higher costs of goods and services reduced disposable income, further dampening buyer demand.
These factors combined to create a market where fewer transactions occurred despite the greater availability of homes. This scenario underscores the interplay between demand and supply.
The number of homes available for sale has a direct impact on pricing. 2024 supply increased significantly, driving down the median house price in New Zealand.
As shown in the table below, supply increased by 11% in 2024 vs 2022 (based on data from 10 months in 2024), while transactions decreased by 8.07%. This dynamic has played a significant role in the decline of New Zealand house prices during 2024.
Mortgage rate changes are critical in shaping the NZ housing market predictions. When rates rise, borrowing becomes more expensive, reducing buyer demand. Conversely, rate cuts encourage purchasing and drive growth in the NZ housing market.
As seen in the chart above, In 2022, we experienced historically low interest rates, with the government encouraging spending after the COVID outbreak. This led to a surge in homebuying as many people had the financial means to enter the market. Coupled with a low housing supply, the competition was fierce, causing prices to skyrocket.
Fast-forward to now, and with significantly higher interest rates—levels we believe are more sustainable—many homeowners have been forced to sell. This shift was a deliberate move by the government to curb spending and bring inflation under control.
Looking ahead to 2025, we anticipate further interest rate cuts, although we’ll unlikely see rates as low as 3-4% for a long time. As rates gradually decrease, it’s expected to encourage more spending, fostering a healthier market with prices within more affordable ranges for buyers.
This adjustment should bring much-needed balance to the real estate market.
The income-to-house price ratio NZ is a critical measure of affordability. Currently sitting at 6.7, this indicates that house prices in NZ are still beyond the reach for many buyers. A healthy ratio is between 3 - 5X household income.
During the last few years in New Zealand, we've seen an affordability crisis. The National Government's efforts have brought inflation down to 2.2% (from the high of 7.2%), but that doesn’t come without consequences.
As you can see, the income-to-house price ratio was at good levels from 2008 to 2014; today, we sit at a ratio of 6.7 times income-to-house prices.
The income-to-house price ratio has started to decline, but unemployment has risen. This is best explained by the Phillips Curve.
The Phillips Curve explains the inverse relationship between inflation and unemployment, offering insights into how these factors affect house prices.
The Impact of Unemployment on Housing Prices
Unemployment significantly influences housing demand and prices:
In NZ, rising unemployment could slow the market further. We still expect to see layoffs next year as businesses struggle with higher costs.
The real estate cycle has four phases: expansion, peak, contraction, and trough. Each phase impacts house prices differently.
Looking ahead, we predict 2025 will bring further stabilisation to the NZ housing market. While house price predictions vary, our analysis suggests the market is near the trough of its real estate cycle. Buyers may still benefit from declining house sale prices in the first half of 2025, creating opportunities for strategic investments.
There will be some great buys out there, and if you are looking to sell, we don’t believe the market will return to a healthy growth of 2-4% in 2025. In 2026, we may see a return to the Expansion phase.
However, buyers will be out there if you have a desirable property. Just look at what we achieved for this beautiful Hillsborough property in Christchurch.
Advice for Investors, Family Buyers and Sellers in Today’s Market
The economic indicators, market cycles, and buyer behaviour shape the landscape of house prices in NZ. Understanding the factors discussed in this article will be critical for anyone involved in real estate. as we move into 2025.
We expect house prices to decline further into 2025, before stabilising, driven by affordability challenges, rising unemployment, and increased housing supply. However, desirable properties may still attract buyers.
Focus on five key variables: median sale prices, annual homes sold, supply of inventory, mortgage rates, and affordability metrics. Understanding their interplay will help forecast market trends.
Banks predict a 7% increase in median house prices for 2025, while at Najib Real Estate, we expect the market to stabilise in 2025 with little growth.
2025 presents a great opportunity to purchase a home or investment property as the market approaches the trough of the real estate cycle. Partnering with experienced professionals can help you identify properties with strong long-term investment potential.
The current ratio is approximately 6.7x annual earnings to house prices, which is higher than sustainable levels. This gap is gradually narrowing due to falling prices and government efforts to reduce inflation.
Rising unemployment reduces buyer confidence and demand, leading to lower prices. Conversely, low unemployment increases demand and pushes prices upward.
A sustainable growth rate for house prices is 2-4% annually, aligning with wage growth and maintaining affordability for buyers.
Looking to sell, buy, or manage your property? Partner with Najib Real Estate for expert guidance and exceptional service. Contact us today to get started.