New Zealand house prices are still on average about 30% lower than they were at the peak of the market.
By Susan Edmunds of RNZ
Cotality's latest data shows house prices continue to drift sideways.
The average home value according to its index was $808,187, down 0.1% from three months earlier, down 0.6% from a year earlier and 17% from the 2022 peak.
But when adjusted for inflation over that time, the drop is about 31% in real terms.
This means that in real terms, house prices are back at mid-2016 levels.
Auckland and Wellington have had bigger falls - 37% in Auckland and 39% in Wellington once inflation-adjusted.
In comparison, after the global financial crisis, the trough was a drop of 16% in real terms.
Cotality chief property economist Kelvin Davidson said the flat data for May was a continuation of a sluggish start to 2026.
"Property values are generally stuck in neutral at the national level, with buyers in no major rush, but sellers not having to capitulate either.
"There are differing patterns beneath the surface. Key areas, including Auckland and Wellington are still subdued, while even 'strong' markets such as Christchurch or Invercargill aren't racing away.
"Interest rates have already lifted in recent months and there's likely to be more to come the longer the Iran conflict continues. At the same time, consumer and business confidence has been hit hard, and there are other signs of economic weakness coming through, such as falls in retail spending. It all adds up to significant headwinds for sales activity and property values in the coming months."
He said prices were not likely to fall much further, given the improvements in affordability in the past four or five years.
David Cunningham from Squirrel Mortgages urged people not to panic, saying markets fluctuate with global pressures. (Source: Breakfast)
"Nevertheless, renewed, modest declines in property values in the coming months would not be a surprise.
"There's always two sides of the market, and people looking to buy at the moment are probably pretty pleased with flat house prices, or even slightly down in some markets.
"It depends on your perspective, I guess, and where you are as well, but what we are seeing at the moment is that this is a good market for first-time buyers continuing to take advantage of lower house prices, lower interest rates."
Davidson said the supply pipeline of new townhouses in Auckland was helping to stop prices rising and meant purchasers were in a good position, particularly first-home buyers or investors who wanted to add to their portfolio.
Wellington also was having its prices pushed down by an increase in supply, he said.
"But it seems that the far bigger factors will have been the previous boom and sharp reduction in affordability, which created the scope for subsequent large falls in property values, and then just the underlying weakness of the area's economy - as the public sector now faces even more cuts.
Consents for new builds appear to have bottomed out, with Auckland apartments leading a comeback. (Source: 1News)
"Of course, there's always two sides to the housing market and first home buyers who are confident of their own financial resilience are taking full advantage."
He said, when it had been expected that interest rates would stay low and the economy would recover, Cotality had thought there might be 100,000 sales this year, compared to 90,000 last year.
Now, it was forecasting 90,000 at most this year.
"Now, 90,000 is not terrible, it's around about the long-term average... but compared to the 100,000 we were thinking, it's quite a big shift."
He said while interest rates were higher, they were still lower than they had been in recent years.
"Unemployment might stay a little bit higher but no one is predicting it to spike upwards so I think it's probably more of the same. Things do sort of trend sideways and that's a continuation of what we've had for the last two years really."
Davidson said the Reserve Bank had a tricky balancing act to navigate, and that would affect the property market.
"The longer the OCR [Official Cash Rate] stays on hold the greater the chances inflation is harder to rein back in again - which will tend to put more upwards pressure on mortgage rates.
"But the quicker they move, the higher are the chances of a marked weakening in the economy, with associated knocks to household confidence, the labour market, and also property sales and house prices.
"Clearly, the housing market is not a direct consideration for monetary policy anyway.
"But in these uncertain times, it may still be caught in the cross-fire - with an OCR rise now looking likely in July - especially as more existing borrowers start to roll off older mortgage terms and on to higher rates."
The morning's headlines in 90 seconds, including Trump's heated call with Netanyahu and New Zealand's luckiest lotto player this year. (Source: 1News)
SHARE ME