House prices tipped to rise, new fund launched
While budget 2025 offered little in the way of new housing policy announcements during the finance minister’s speech, Treasury’s Economic and Fiscal Update projected a housing market recovery over the coming year.
Annual house price growth is expected to rise from 0.3% in June 2025 to 5.6% by June 2026, with price growth averaging 5.3% annually through to 2029. The rebound is underpinned by stabilising sales, stronger labour market conditions, and the impact of lower interest rates.
The update noted that while house prices had weakened through 2024, recent months have seen slight price rises and increased market activity, OneRoof reported.
Mortgage rates in focus as economists look to Reserve Bank
Despite the budget’s limited housing commentary, economists said the real impact on mortgage holders will come from the Reserve Bank’s next move.
“We are not seeing a lift in investor activity. We need lower rates for that to happen,” said Kiwibank chief economist Jarrod Kerr (pictured left). “We are at a point now where a cut of 25 basis points is just mucking around. We are not here to muck around.”
Ray White NZ chief executive Daniel Coulson (pictured right) agreed, noting the importance of interest rate settings.
“When the OCR went down 50 basis points, we did see a significant uplift in buyer activity,” Coulson said. “But for almost all of the subsequent reductions, there hasn’t been a noticeable reaction other than it’s probably given people more confidence in the direction of travel.”
KiwiSaver changes may help first-home buyers – but only slightly
Finance Minister Nicola Willis’s primary housing-related announcement concerned changes to KiwiSaver settings aimed at helping first-home buyers.
“This will encourage more young people to adopt a savings habit and help them build a deposit for their first home,” Willis said.
Key changes include:
- Halving the government’s annual KiwiSaver contribution to a maximum of $260.72
- Increasing the default employee contribution rate to 4%, though a 3% option remains
- Extending employer matching contributions to 16- and 17-year-olds
- Making 16- and 17-year-olds eligible for government contributions from July
The changes are part of a broader initiative to boost investment and savings across the economy, which Willis said will support long-term financial resilience.
Kerr welcomed the broader aim but added, “You get that once a year. It’s not going to make or break your deposit.”
New housing fund to replace old programmes
Budget 2025 introduced a new $250 million Flexible Fund to replace existing housing programmes like the Affordable Housing Fund and Progressive Home Ownership Fund.
The Flexible Fund aims to deliver 650–900 affordable and social homes from July 2027, with support for Kāinga Ora, Māori, and community housing providers.
$128m social housing boost, plus lower borrowing costs for providers
Beyond longer-term reforms, budget 2025 commits $128 million over four years to deliver at least 550 more social homes in Auckland in 2025/26, in addition to 1,500 homes funded under budget 2024.
To speed up construction:
- $82 million has been allocated for upfront payments to community housing providers
- $150 million in Crown lending facilities will reduce borrowing costs
Affordable rentals will also be supported as a “missing link” between market rents and traditional social housing.
No word yet on foreign buyer ban changes
Despite speculation, budget 2025 made no mention of changes to New Zealand’s foreign buyer ban, in place since 2018. However, political commentary outside Parliament hinted that a policy shift could still be on the cards, OneRoof reported.
Prime Minister Christopher Luxon told Newstalk ZB he favours raising the purchase threshold for overseas buyers. Deputy PM Winston Peters said an announcement might not be far off – though there was nothing in the budget itself.
Act Party leader David Seymour denied any policy update, saying: “Every time I’ve been asked, I’ve told them there is no decision I’m aware of and that it’s wrong to speculate unless you know something I don’t.”
Expert reaction: ‘Pretty vanilla’ budget for housing
Industry figures described Budget 2025 as steady, with no major surprises for the housing sector.
Ray White’s Coulson said the focus now shifts to the Reserve Bank’s OCR announcement, while Mark Harris, managing director of New Zealand Sotheby’s International Realty, called the budget “pretty vanilla”.
“I think fiscal responsibility adds confidence in its own way so I’m not upset with it,” Harris said.
He noted no change to the foreign buyer ban, despite supporting a lift, and welcomed the government’s new Investment Boost tax incentive, saying: “We can go and invest in a new office in Auckland… that helps us grow our business, but it also helps people being employed, so I think it is positive.”
The investment boost allows businesses to immediately deduct 20% of new asset costs from taxable income, on top of depreciation – expected to lift GDP by 1% and wages by 1.5% over the next 20 years.
Wider recovery plan underpins housing outlook
Budget 2025 projects 240,000 new jobs, rising incomes, lower interest rates, and stable inflation as part of New Zealand’s economic recovery.
These gains, underpinned by $21.4 billion in redirected savings and $6.8 billion in infrastructure investment, aim to create conditions that indirectly support a stronger housing market.
