Residential housing prices

IBISWorld forecasts the price of residential housing to rise by 9.6% in 2025-26, to 103.2 index points. Residential housing prices in New Zealand have spiked after a temporary decline in 2023-24. House prices are soaring in the current year, following a major surge in demand and the slow pace of housing supply. According to Stats NZ (Tatauranga Aotearoa), only 6.6 new dwellings were consented per 1,000 residents in the year to September 2025, marking a significant drop from the early 1970s peak of 13.4 per 1,000. This points to a pronounced shortfall in housing supply relative to population growth, underscoring ongoing housing pressures. During the pandemic, migration plummeted when international borders were shut. Migration has gradually rebounded, which is further intensifying pressure on the housing supply. In addition, the RBNZ has been reducing the official cash rate since mid-late 2024. This has further stimulated a rise in demand through mortgage affordability, contributing to an expected steep rise in residential housing prices in the current year.

The pandemic was a major driver of volatility in residential housing prices over the past five years, upending both supply and demand for housing in New Zealand. For much of the past decade, an extended period of very low interest rates drove investment in housing, putting upward pressure on prices. In the early stages of the pandemic, interest rates were reduced to record lows in an attempt to offset the negative economic effects of the pandemic. Investment flooded in from both owner-occupiers and property investors. At the same time, pandemic-related restrictions to both labour and material supply heavily undermined housing supply and put further upwards pressure on prices in the residential property market. These imbalances in supply and demand caused a major surge in residential housing prices in 2020-21 and 2021-22.

Prior to the pandemic, strong demand for residential property from overseas buyers and high net migration numbers were major factors behind a consistent rise in residential housing prices. Low interest rates on mortgages and the lack of a capital gains tax on investments also contributed to the attractiveness of the New Zealand residential property market for private investors. Policy changes have shifted this dynamic, particularly since 2021-22. The volume of foreign investment is increasingly constrained by the foreign buyer ban that passed through the New Zealand Parliament (Paremata Aotearoa) in 2018. Migration also collapsed during the pandemic after New Zealand shut its international border from March 2020 to August 2022. Migration has only slowly recovered from this major shock, which constrained demand for residential housing in New Zealand. Moreover, the RBNZ responded to a surge in inflation with its fastest hiking cycle in history. The Official Cash Rate (OCR) soared in 2022-23 and 2023-24, which heavily constrained domestic investment into the residential property market, resulting in a major slowing and subsequent decline in residential housing prices over the period. As net migration continues to grow into 2025-26 as expected from StatNZ projections and interest rates contintue easing, these trends are expected to reverse. Overall, IBISWorld forecasts the residential housing price index to increase at a compound annual rate of 5.8% over the five years through 2025-26.