The Cotality Home Value Index shows that the market stalled in May, as a cautious stance from both buyers and sellers kept values flat. The national median value in May of $808,187 was unchanged from the previous month and -0.1% lower than three months ago. Values were also -0.6% down from a year ago and still -17.0% below the peak in early 2022 of $974,002.
Across the main centres:
- Christchurch rose by 0.4%
- Dunedin and Tauranga both edged up by 0.2%
- Hamilton saw a minor 0.1% rise
- Auckland (-0.2%) and Wellington (-0.3%) both fell a little further again
Around the provinces, many (although not all) markets saw flat or slightly higher results for values in May, with gains of 0.2% or a touch more in Queenstown, Gisborne, and Invercargill, while Rotorua (0.6%) and Whanganui (0.8%) recorded stronger increases.
The headwinds are still blowing
Thinking about the underlying drivers, mortgage interest rates have already lifted in recent months – even before the RBNZ has taken any action – 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.
Even so, with housing affordability already having improved a long way in recent years, there’s likely to be a tight limit on any further falls in house prices.
Where to next?
There’s still a tricky balancing act for the Reserve Bank to pull off, which will have effects on the property market. The longer the OCR 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 property sales and house prices.
Clearly, the housing market is not a direct consideration for monetary policy anyway. But it could still be a casualty, with an OCR rise now looking likely in July. Higher rates over the medium term will test new borrowers, as well as more existing borrowers as they start to roll off older mortgage terms and onto increased levels.
Challenges and opportunities
Of course, first home buyers who are confident about their financial resilience should continue to find good opportunities in a market where listings remain elevated. To some extent that applies to investors as well. But this group has other concerns, such as the looming election and scope for capital gains tax (and potential loss of interest deductibility too) if we see a change of government.
All in all, housing market conditions remain challenging. Having previously anticipated sales volumes rising from around 90,000 in 2025 to 100,000 this year, the market may actually do well to hold at similar levels to last year. This points to a sluggish outlook for values too.
At The Mortgage Supply Co, we’re here to guide you every step of the way, whether you buying, selling, or refinancing. Reach out to our team today to discuss your unique situation and how we can support you in navigating the ever-changing property market!
