ASB tips a slower, income-led recovery as structural headwinds reshape the housing outlook
New Zealand house prices are unlikely to reclaim their late-2021 peaks until as late as 2029, according to a new ASB Economics note, which argues the housing market has entered a structurally different phase rather than simply a temporary downturn.
Structural shifts, not just a cyclical dip
ASB senior economist Mark Smith (pictured) said the three-decade run of strong house price gains before COVID-19 — averaging around 6% a year — was underpinned by conditions that are now fading.
Falling mortgage rates, a positive population-price relationship, and constrained housing supply all helped drive prices higher in the past, but ASB said each of these drivers is now shifting in the opposite direction.
"There is some risk that the trend direction in mortgage interest rates is up," the report said, reversing decades of decline.
Net migration inflows are also running at roughly 40% of the decade average, while a more responsive dwelling supply — including a 20% jump in residential consents over the past year — has added to the pool of options available to buyers.
Together, these shifts point to a housing market unwinding several of its historic tailwinds at once. That's already visible in ASB's own lending data: the bank's Home Loan Rate Report shows one-year fixed rates at 4.99% and floating rates at 6.29%, both already past their cycle lows.
Nationwide prices currently sit about 15% below their late-2021 peak, or nearly 30% lower once inflation is accounted for. ASB expects no change in prices this year, followed by a modest 3.5% rise in 2027, with growth then tracking broadly in line with nominal income growth of around 5% annually. "It may not be until late 2029 that nationwide house prices approach late 2021 peaks on a nominal basis," the bank said.
That timeline isn't just ASB's own view — the Reserve Bank's latest forecasts are in a similar ballpark, projecting nationwide prices will still be around 4% below late-2021 levels by mid-2029.
A more even, income-led recovery ahead
Rather than a repeat of the debt-fuelled booms of the past, ASB expects any recovery to be led by household income growth rather than borrowing.
"This would imply that the next cyclical upturn could lead (rather than lag) the house price pick-up," the report said. The bank noted this kind of recovery would likely be more moderate and durable, reducing the risk of the economy overheating in the way it did during the pandemic-era boom.
Regionally, Christchurch and other parts of the South Island are expected to keep outperforming Auckland and Wellington over the coming year, although ASB does not expect this to become a sustained trend.
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