A fragile upturn faces rising rates, weak confidence, and a sluggish winter ahead
New Zealand home values have risen for three consecutive months, but the window for further gains may be closing — and mortgage advisers should be prepared for clients to face a harder lending environment through the second half of 2026.
The Cotality Home Value Index rose 0.1% in April, following gains of 0.1% in March and 0.4% in February. The national median now sits at $809,101 — 0.6% higher than January, but still 0.8% below year-ago levels and a long way from the peak of late 2021 and early 2022.
Auckland and Wellington remain patchy, and NZFSG's May Economic Outlook notes that despite sales volumes making a sluggish start to the year, values have managed to edge higher — though growth has been modest and uneven.
The report is candid about what comes next.
"There now seems to be a pretty good chance that the mini-upturn will peter out soon or even go into reverse," said Kelvin Davidson (pictured), Cotality chief property economist.
Headwinds are building — but not everywhere
The Iran conflict sits at the centre of the deteriorating outlook, with the NZFSG report pointing to rising inflation, collapsing business and consumer confidence, and a broader softening in economic indicators as forces that will weigh on both house sales and prices.
While improved affordability — relative to recent years — and a wide range of properties to choose from continue to favour buyers, the report describes conditions as firmly a buyer's market, with first-home buyers and some smaller investors the main beneficiaries.
REINZ data for April confirms the softness. Sales volumes fell 7.9% year-on-year to 6,262 transactions nationally, with Auckland down 14.8% to 1,783 sales. The REINZ HPI declined 0.4% month-on-month and 0.9% over the year, with inventory at 37,334 listings near multi-year highs and properties taking a median 42 days to sell nationally.
Bank forecasters are not expecting a near-term reversal. ASB said it expects house prices to remain flat in 2026, with the balance of risks tilted lower, while Westpac is forecasting a modest 1% national price fall over the year.
Borrowers are already fixing longer — here's what that means
Mortgage rates are adding to the pressure, with upward movement already under way before the RBNZ has made any official cash rate moves. The first OCR hike is expected in either July or September, and Davidson notes there is further scope for mortgage rates to climb regardless of when the RBNZ acts.
The shift in borrower behaviour is already visible in the lending data. More than 50% of new loans have recently been fixed for longer than 12 months, up sharply from around 20% in the September to November period last year. The two-year fixed rate has become more popular than at any point since late 2022 and early 2023 — a clear signal that borrowers are seeking certainty in an uncertain rate environment.
For mortgage advisers, the report offers a useful framing for client conversations. Most commentators currently expect a relatively short and sharp OCR tightening cycle, largely complete or paused by early next year, with the OCR settling in the 3–3.5% neutral range.
"Some mortgage rates below 6% should still be possible," Davidson said, offering a degree of reassurance that the rate environment, while rising, is not expected to reach the extremes of the 2022–23 cycle.
The overall picture, however, is one of caution. Davidson expects a sluggish winter for house prices and, following a modest start to the year, is forecasting a flat or slightly negative result for the full 2026 calendar year.
"Overall, economic and interest rate conditions do not look conducive to a lasting rise in property values," he said.
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