New Zealand home prices are expected to rise steadily through 2027 as the market recovers after posting annual declines in the last three years, according to a Reuters poll of property analysts who expect further monetary policy easing to boost confidence in the housing market.
Since August, the Reserve Bank of New Zealand (RBNZ) has cut interest rates by 225 basis points, helping the market tick up, and is expected to cut by another 50 basis points by year-end, according to another Reuters poll.
That would help further reduce mortgage rates which have already fallen nearly 20% from when policy rates were at a 15-year high a year ago.
Average home prices were forecast to rise 3.8% this year, according to the median forecast of 14 property analysts polled, albeit slower than the 5.0% predicted forecast in a February poll.
"There's a lot of uncertainty out there at the moment. Buyers are still a little bit more hesitant than we thought. The rebound, although it started, is not quite as strong as we had hoped for," said Jarrod Kerr, chief economist at Kiwibank.
Prices are expected to climb 6.0% and 5.1% in 2026 and 2027 respectively.
Prices boomed during the COVID-19 pandemic and while they have fallen nearly 20% from their late-2021 peak - reversing only around half their COVID gains - the market continues to favour existing homeowners who have built significant equity.
Home prices are approximately six times the average household income and homeownership remains out of reach for many first-time buyers.
With the economy only emerging from a recession late last year and high unemployment weighing on household spending, saving for a deposit remains a challenge for people wanting to make their first step onto the property ladder in one of the most expensive housing markets among OECD countries.
Offering some hope, housing supply in New Zealand has increased over the past few months as buyers are seeking properties with lower price points. Supply of housing increased 6.2% in April from a year ago, according to REINZ.
With borrowing costs falling and supply rising, nine of 11 analysts said purchasing conditions for first-time buyers would improve over the coming year. Two said they would worsen.
Urban home rents were expected to rise 3.0% this year according to a smaller sample of forecasters, outpacing the 2.2% inflation rate projected in a separate poll.
