Government aims to shift mindset as housing market flatlines
Housing Minister Chris Bishop (pictured left) said New Zealand must abandon the idea that its economy depends on rising house prices, describing it as a core part of the government’s economic reform agenda.
“We’ve got to decouple the idea that the economy is linked to house price growth. It’s not.”
Bishop said the country’s recovery should be driven by productivity, not property speculation, interest.co.nz reported.
“Destroying the idea that the New Zealand economy should just be based on house price growth is a fundamental formula this government is trying to embed into the New Zealand psyche and also into the arteries of the economy,” Bishop said. “It will take some time, but I'm pleased with the process we're making,” he said.
House prices fall for fourth month
New Real Estate Institute of New Zealand (REINZ) data showed house prices declined for the fourth straight month in June and are up just 0.3% year-on-year. Buyers remain cautious amid job security concerns and a growing stock of unsold homes, which is weakening sellers’ leverage.
Agents report an oversupply in some markets — a stark contrast to the housing shortages of previous years.
Economists say that despite the Reserve Bank’s rate cuts, house prices have not rebounded, which has muted the wealth effect normally associated with lower interest rates.
RBNZ tools and housing policies aim to contain market
The Reserve Bank of New Zealand (RBNZ) now has additional tools to cap borrowing, such as debt-to-income (DTI) limits and loan-to-value ratio (LVR) restrictions. These policies are designed to prevent the housing market from overheating again.
The government is also targeting real-term reductions in house prices through increased supply and planning reform. Bishop said stabilisation in housing costs is a positive development.
“Rents I would characterise as flat to falling. There's now quite a bit of evidence coming through … that new rents are falling in some markets. House prices you could broadly characterise as stable, and that's a good thing,” he said.
Asset stagnation weighs on household spending
BNZ’s head of research Stephen Toplis (pictured center) said house prices have stabilised but show no signs of rebounding.
“Household net wealth has flatlined since mid-2021,” Toplis said. “House value is the key component of this… With asset prices going nowhere fast it shouldn’t be a great surprise that household spending is doing likewise.”
The $1.6 trillion residential property sector remains a key transmission channel for monetary policy, given its impact on consumer confidence and spending.
Kiwibank sees housing rebound as vital to growth
Kiwibank chief economist Jarrod Kerr (pictured right) argued that more OCR cuts are needed to stimulate demand in the housing market and support economic recovery.
“More rate cuts are needed to stimulate demand in housing. Much of our optimistic forecasts for growth in the Kiwi economy into 2026 is predicated on a bounce in housing demand — It’s the Kiwi way,” Kerr said.
Kiwibank expects house prices to rise 5–7% in 2026 as investor confidence returns, though Kerr admitted the rebound has taken longer than forecast.
“Although we said the exact same thing coming into 2025. Unfortunately, the housing market has underperformed for longer, much longer, than we expected.”
Long-term view favours first-home buyers
Bishop said the persistent focus on house prices in the media was misplaced and counterproductive.
“It frustrates me that, every time you open up some of the media outlets, there’s a huge interest in things like, housing market yet to take off, and everything's characterized as: we need house prices to rise,” he said.
Bishop added that flat prices should be welcomed by prospective homeowners.
“The flipside of stagnant house prices was that it would be easier for first-time buyers to get into the housing market. This should be celebrated rather than bemoaned,” he said.
Kerr: Rate cuts take time to filter through
Currency strategist Roger J Kerr pushed back on pessimistic economic commentary, arguing that rate cuts simply need time to take effect.
“The local doomsayers just appear to be overly impatient and not understanding the transmission/timing mechanisms in the NZ economy from when the RBNZ cut interest rates until domestic spending picks up as a result,” Kerr told interest.co.nz.
“It takes over 12 months to have an impact from the time monetary easing is commenced. RBNZ started easing policy last August, so from next month it is highly likely we will see an improvement in the retail and residential property sectors.”
He said the export sector was booming, business confidence was near record highs, and he still forecast 3% annual growth by the end of 2025, compared to RBNZ’s more cautious 1.8%.
“It does seem that if house prices are not rising, the majority of the local economic commentators do not think the economy is performing. These are jaundiced and ill-informed attitudes that do not serve the public well,” Kerr said.
