Sales keep falling as OCR tightening cycle begins to bite
New Zealand's housing market remains firmly in buyers' favour, with sales activity extending a run of declines even as first-home buyers push their market share to a fresh record, according to Cotality's Monthly Housing Chart Pack for August.
The data points to a market where caution among vendors and purchasers alike is being reinforced by a Reserve Bank tightening cycle that has already begun.
Sales slide for a seventh straight month as buyers hold the upper hand
There were 6,935 property deals across the country in July, down 6.4% on the same month last year and the seventh consecutive monthly fall.
Cotality's report notes that "clearly, buyers and sellers remain in a cautious mood," with the 12-month rolling sales total easing to 89,385 from December's mini-peak of 91,411.
The high volume of stock on the market — with total listings at 27,336, above the five-year average of 26,314 — is handing buyers considerable pricing power, even though most vendors aren't under pressure to sell.
National median property values reflected that softness, edging down 0.3% in July and 0.7% over the year, with Auckland and Wellington still sluggish while Christchurch has proven more resilient, posting annual growth of 3.6%.
First-home buyers push higher as investors stay selective
Against that subdued backdrop, first-home buyers have become an increasingly dominant force, lifting their share of purchases to a new monthly record of 29.0% in July, with the actual number of first-home buyer deals still climbing.
Cotality attributes this partly to buyers accessing KiwiSaver for deposits and banks' low-deposit lending allowances. Mortgaged multiple property owners also lifted their share to 24.1% after a quieter first half of the year, though Cotality cautions this "may not last, given a cashflow squeeze from flat rents but rising costs," alongside election-related uncertainty and the possibility of higher property taxes. Movers, meanwhile, remain historically subdued, held back by ongoing job and economic uncertainty.
That caution lines up with the wider picture — unemployment climbed to an 11-year high of 5.6% in the June quarter, even as GDP growth is expected to resume, with Westpac forecasting 2.1% growth over 2026 and 3% in 2027.
Mortgage rates set to keep climbing
Adding to the cautious mood, the Reserve Bank has already lifted the OCR to 2.5% in its July decision, with Cotality expecting a further rise in September and potentially another in December, taking the OCR to around a "neutral" 3%.
Westpac, ASB and Kiwibank all expect a 25-basis-point hike to 2.75% at the RBNZ's 2 September Monetary Policy Statement, but diverge on where the cycle ends: Westpac's neutral-rate assumption points to further hikes beyond ASB's 3.25% year-end forecast, while Kiwibank expects just one more move to 3% before the RBNZ should stop — well short of the 3.65% the wholesale market has priced in for December 2027.
Mortgage rates have been drifting higher in recent weeks, and Cotality notes many borrowers are opting to fix for longer terms now to insure against further rises — though those rolling off a shorter fixed rate onto a new longer-term loan will typically see a higher rate as a result.
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