New Zealand’s housing market is closing out 2025 in a stronger position than it started, with early signs of recovery emerging after a long and uneven downturn. According to LJ Hooker Head of Research, Mathew Tiller, improving confidence, lower interest rates and more active buyers have shifted the conversation from “how bad” to “how long” before momentum builds.
Access LJ Hooker's year in review 2025
From downturn to early recovery
Tiller said the year had been defined by caution, but that sentiment was now changing.
“At the start of 2025 households were still feeling the weight of rising living costs, a soft labour market and inflation sitting at the upper end of the RBNZ’s target,” he said.
“As the year went on, cuts to the Official Cash Rate and signs of stabilisation helped lift confidence, even while some data remained patchy.”
Cotality’s home value index showed national values were flat in November after two months of modest gains, with the national median sitting around $807,000. Sales, listings and building activity have picked up, while first-home buyers have become “a much bigger part of the market story”.
Economy, inflation and interest rates
The economic backdrop remained challenging for much of the year. Unemployment drifted higher to 5.3% and household budgets stayed tight, but easing inflation and aggressive interest rate cuts shifted conditions into more supportive territory.
“The RBNZ moved decisively into easing mode this year,” Tiller said.
“We’ve seen a full 2 percentage point reduction to the OCR in 2025 alone, taking it down to 2.25%. Markets and forecasters agree the low point is now close – the question is how long rates stay low.”
Annual CPI inflation currently sits at 3.0%, with downward pressure expected to continue into 2026.
Prices, sales, listings and rents
The housing market has effectively “stopped going backwards”. Cotality data shows national values were flat in November following small gains in September and October, though values remain around 15% below their 2022 peak.
Sales activity has recovered from last year’s lows, with REINZ reporting a 6.4% annual lift in October. New listings rose 10.9% year on year in November, giving buyers more choice.
“We’re seeing better sales volumes slowly chip away at rising stock levels,” Tiller said.
“That usually sets the stage for firmer conditions in the next phase of the cycle.”
The rental market has also cooled. Realestate.co.nz data shows the national average weekly rent fell 3.1% year on year in November to $626, with total rental stock up more than 17%.
“More rental supply and slower population growth have taken the heat out of the rental sector,” Tiller said.
“For tenants and first-home buyers this helps rebalance budgets at the same time mortgage rates are falling.”
Regional highlights
Regional trends varied widely.
Auckland and Wellington, which saw the deepest corrections earlier in the cycle, remain well below their 2022 peaks. Auckland’s median rose 3.6% annually to $1,033,000 in October, while Wellington’s dipped 3.5% to $767,500.
Further south, markets are firmer. Canterbury posted a 1.4% annual rise to $710,000, and Christchurch and Dunedin recorded some of the strongest monthly gains nationally.
Premium lifestyle and tourism markets also gathered pace.
“Central Otago Lakes became New Zealand’s first region with an average asking price above $1.6 million, and Queenstown Lakes reached new medians around $1.59 million,” Tiller said.
Who is buying
First-home buyers have been the strongest force in the market this year, making up a record 27.7% of purchases in the September quarter.
“Lower prices, lower mortgage rates and more flexible lending settings have given first-home buyers a real opening this year,” Tiller said.
Existing owners have begun re-entering the market as confidence improves, particularly families trading within mid-range price brackets. Investors have been slower to return but are responding to the completed reinstatement of interest deductibility from 1 April 2025.
Policy changes shaping the market
The return of full interest deductibility and the final implementation of Healthy Homes standards have influenced both investor behaviour and rental markets.
“Some older or non-compliant rental properties have been upgraded or sold, and many are ending up with first-home buyers,” Tiller said.
Looking ahead, two policy changes will affect supply at the margins: the 2026 introduction of a building-consent exemption for 70sqm granny flats, and a narrow overseas-buyer exemption for Active Investor Plus visa holders purchasing $5 million-plus homes.
Outlook for 2026
The outlook for 2026 is broadly positive, with steady confidence and modest price growth expected.
“Most forecasts point to low and stable mortgage rates next year, and that supports gradual, sustainable growth rather than a boom,” Tiller said.
“We expect low to mid-single digit value growth nationally in 2026. That’s enough to encourage building and trading activity without reigniting affordability pressures.”
Building consents are already rising, particularly for townhouses and smaller dwellings, suggesting new supply will continue to flow.
Tiller said the key themes for 2026 include sustained first-home-buyer demand, investors adjusting to new compliance and tax settings, and the labour market finding its floor.
“Granny flat rules and the high-end overseas-buyer exemption will influence activity at the edges, but jobs, wages and interest rates will still do most of the heavy lifting,” he said.
“Overall, 2026 looks set to be a better and more balanced year for the housing market.”
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