New Zealand Property Market 2025 - boom or breather?

Will property prices continue to climb, or is the market set to ease after years of dramatic growth?

It's no secret that over the past decade, skyrocketing house prices have sparked everything from dinner-table debates to major policy reforms. Now, fresh forecasts offer a glimpse into what might happen next.

The Case for Continued Property Price Growth

For those who believe the market still has some steam left, a common refrain is that demand for quality housing in New Zealand simply isn't slowing down. ASB Bank is leading the charge with a forecast of a 10% price increase in 2025. Their argument is straightforward. Despite global uncertainties and affordability concerns, strong demand paired with limited supply could keep pressure on prices. Despite headwinds like global uncertainties and affordability concerns, the fundamental - strong demand paired with limited supply - could keep upward pressure on prices.  

Westpac echoes that optimism, predicting an 8% uptick in property values and pointing out that New Zealand's housing market has proven remarkably resilient in the past. Even during economic downturns, the allure of homeownership - combined with a national penchant for real estate investment - tends to shield the market from the worst of global shocks.

Somewhere in between, the Reserve Bank of New Zealand offers a more measured 7.06% increase forecast, hinting that while the market may keep climbing, it's unlikely to repeat the dizzying double-digit gains of recent memory. We, too, see growth on the horizon. Our message? Not all towns and cities will trend the same way - making it more critical than ever for buyers and sellers to keep a close eye on local conditions.

Key Influences to Watch

• Interest Rates: Historically low interest rates have been the oxygen feeding New Zealand's housing fire. If they stay at their current levels or even dip lower, you can expect buyers to keep flooding the market - further propping up prices. However, should interest rates climb, you could see that enthusiasm wane as mortgages become harder to service. Any shift here will ripple through the entire real estate scene.
• Unemployment: Stability in the job market is the unsung hero of housing demand. Rising unemployment levels could see consumers more hesitant to secure new loans and big-ticket commitments. The outlook is relatively benign, but a global slowdown or unexpected economic hiccup could quickly change that dynamic.
• Affordability: The proverbial elephant in the room is affordability. If prices continue to climb steeply, fewer people can afford to enter the market - which naturally cools demand and could restrain further price increases. 
• Debt-to-Income Ratios: New lending restrictions based on debt-to-income (DTI) ratios may place a governor on runaway house prices. If regulators decide to tighten these rules, borrowers could find it harder to secure high-value loans. That alone might discourage speculation and temper the overall pace of price growth, potentially leading to a more sustainable - and less volatile - market. 
• Population Growth: Finally, any slowdown in population growth, especially if immigration remains lower than usual, could reduce demand in certain regions.

What It All Means for You

Whether you're looking to buy, sell, or keep tabs on the market, the takeaway is surprisingly clear: Even with some experts calling for a shift to stabilisation, a major drop in prices doesn't appear imminent - barring a significant economic downturn or a sudden spike in interest rates.

For buyers, this means it's wise to remain realistic. If prices rise more slowly or even plateau, you might get a breather from the frenzied conditions seen in past years, but don't bank on a significant crash. For sellers, forecasts from ASB and Westpac suggest solid gains may still be ahead. However, pinning hopes on another dramatic leap in prices might lead to disappointment in certain regions.

No matter which forecast you subscribe to, the New Zealand property market is clearly on the cusp of change. What's certain is that staying informed about interest rates, employment trends, and possible regulatory changes can help you make better decisions in a climate that's as thrilling as it is unpredictable.

Looking for in-depth regional real estate insights and advice? Contact your local Property Brokers team today.  

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