At the beginning of this year, Prendos Property Valuations Director, Matt Edginton, predicted the market was likely to remain firmly in favour of buyers throughout 2026. His prediction went against that of many commentators, who suggested lower mortgage rates would fuel a recovery in prices.
National values are now 0.6% lower than a year ago, and still around 17–18% below the 2021 peak. So, the recovery has not yet eventuated. The prolonged nature of this downturn is significant – national prices peaked four years ago, and on a real (inflation-adjusted) basis they are down closer to 30%.
There is, however, meaningful variation under the surface. Auckland and Wellington continue to underperform, down 2.4% and 2.1% over the last 12 months, respectively. Since the 2021 peak, Wellington is the hardest-hit main centre down 26.5% and Auckland is not much better. At the other end of the spectrum, prices in Christchurch are up 3.6% over the last 12 months and are now back to 2021 peak levels.
So, what held the market back so far in 2026, and are conditions likely to repeat in the second half of the year, and into next?
Why have property prices been stuck?
Despite a meaningful decline in the OCR, from 5.50% in July 2024, to 2.50% today, house prices have not responded. There have been a range of other factors holding prices back, including a still-elevated stock of listings, job market anxiety, weak net migration, continued selling by investors and still stretched affordability (although better).
Reasons for optimism
If you are looking for reasons to be optimistic about the market turning, it is in the two charts below.
Price growth has correlated closely with listings levels over the last five years.
These two charts show that total listings are now tracking below the levels of the last two years, sitting around 28,000 nationally, roughly 9% below the same point in 2025, and right in line with the 5-year average. The declines are most significant in Southland and Otago (where price growth is currently strongest), but all regions, other than Gisborne, are seeing stock levels reduce. Fewer properties on the market shifts the balance of power incrementally toward sellers, and historically that has been a precursor to price stabilisation and recovery.
I think it’s notable how quickly listing numbers are dropping this year – more than just the usual seasonal drop-off over winter. This might just be a result of the upcoming election, or the Iran conflict, but if it proves to be a sustained trend, that could shift the market in favour of sellers more quickly than anticipated.
Who is buying property right now?
The picture here has not changed all that much in a few years. First home buyers remain the stand-out cohort. Their market share set new records in 2023, 2024 and 2025. The current environment of lower prices and lower mortgage rates suits first home buyers, and recently they’ve been able to take advantage of loosened LVR rules.
I find the investor side particularly interesting, as it seems a structural change is underway. The decades-long urgency that drove ordinary New Zealanders to buy investment properties (ultimately a smart investment decision) fuelled by shortage of housing, tax-free capital gains, and steadily falling interest rates, has largely dissipated. Net buying intentions of investors surveyed by Tony Alexander remain around record lows. In other words, there are a lot more investors thinking of selling than buying, and it has been this way since early in 2023. It remains to be seen if this is a permanent change, but I suspect the next generation of investors will not take to property investment in the same way as their predecessors.
What’s happening with interest rates?
The Reserve Bank just increased the OCR to 2.50% at its July 2026 review. Whilst this move was not wholly unexpected, it is interesting how quickly their projections change. As recently as February, the outlook was for no rate increases before mid-2027. This shows two things – they’re clearly moving more quickly than expected, and their forecasts can’t be trusted beyond a couple of months.
The key takeaway for the property market is this: the low point for mortgage rates this cycle has passed. This doesn’t mean rates need to soar the way they did in the previous tightening cycle in 2022, but any support that falling rates were providing is gone. I suspect interest rates will not be a huge factor for the rest of this year, as significant movement up or down looks unlikely.
And does the direction of the OCR even matter?
I don’t think the relationship between OCR and house prices is as strong as many people would think. The chart below shows median sale prices, with green shading when prices are growing and red shading when they’re falling, against the OCR in blue.
Sure, from 2015 to 2024, there is a clean, inverse relationship between the OCR and house prices – OCR moves down, house prices move up (2015 – 2022), OCR moves up, house prices go down (2022 – 2024).
But before that, and again since 2024, the trend is not at all clear. Look at the 2000s. The OCR generally trended up over the decade, and at much higher levels than today, yet house prices also grew. In fact, the strongest period for house price growth, between 2003 – 2006, where prices increased by an average of well over 10% per annum (probably closer to 15% per year), was also a period of a steadily increasing OCR.
This is not to say the OCR is unimportant. But I don’t think looking at the OCR alone will give you any indication of where prices are going. Housing supply, job security and wage growth are going to have just as much, or more to say about the direction of the market.
Outlook for the second half of 2026
Much of the South Island and some regional spots in the North are building momentum. But it would not surprise me to see prices continue their gradual slide for the rest of the year in Auckland and Wellington.
The market will probably go into a “wait and see” mode until after the election in November. At that point, if the number of listings continues to trend down compared to previous years, we could see some upside to my expectations for prices in the main centres.
The long-term story continues to be an interesting one to watch play out. Is this a permanent, structural shift away from housing speculation? Or just a normal – albeit prolonged – downturn?
Annual house price growth averaged 6.8% in the 1992–2019 period (prices doubled every 10 years). What will the average be over the next 25 years? 5% seems to be a common number thrown out there. But I think investors need to be prepared to see even less. Greater housing supply through density rules, more townhouse construction, and increased residential land availability, means the scarcity that helped fuel the price growth is diminishing. For investors especially, the implication is that future returns will increasingly need to be earned through yield, rather than simply waiting for capital gains to do the work.
Credit to Cotality & REINZ for the charts.
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