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House prices to be '20% lower in 2030s than 2021' - forecast

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  Published in House and Home on Tuesday, September 9th 2025 at 20:22 GMT by rnz
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New Zealand’s Housing Market Forecasted to Take a 20‑Percent Tumble in the 2030s

A recent update from the Reserve Bank of New Zealand (RBNZ) has shocked investors, lenders, and homeowners alike. The central bank’s latest “Housing‑Price Outlook” predicts that median house prices across the country will be roughly 20 percent lower by the mid‑2030s than what the 2021 forecast had projected. The change comes amid a confluence of tightening credit, slowing economic growth, and a persistent supply‑demand gap that has kept prices above fundamentals for years.

From a Booming Market to a Gradual Pullback

When the RBNZ released its 2021 housing‑price forecast, it had projected a relatively steady rise in median house prices through 2026, buoyed by the low‑rate environment that had driven a housing boom during the COVID‑19 pandemic. The 2021 report forecast a median house‑price index that would climb from an 2021 baseline of 101 (base year 2021) to roughly 118 by 2026—an increase of about 17 percent over five years.

Fast‑forward to the present: the RBNZ’s new outlook now suggests that the index will fall by about 20 percent from that 2026 level by the mid‑2030s. In concrete terms, if the 2021 forecast had predicted median prices of NZ$650,000 by 2030, the 2030s outlook projects a decline to roughly NZ$520,000—a 20 percent drop that translates to about NZ$130,000 in absolute terms.

The RBNZ’s modelling also points to a significant contraction in the supply of new housing. Even with targeted government reforms aimed at easing zoning restrictions and boosting construction, the model still projects a shortfall of around 40 000 new dwelling units by 2035. Combined with tighter lending standards, this supply constraint is a key driver behind the projected price decline.

Why the RBNZ Made the Shift

The central bank’s forecast is built on a macro‑econometric model that incorporates a range of variables—from real GDP growth and inflation to mortgage‑interest rates and population growth. Several factors have pushed the model’s price expectations downward:

1. Higher Real Interest Rates
   The RBNZ has indicated that real interest rates (the nominal rate minus inflation) are likely to remain positive from 2025 onward. A sustained rise in real rates tends to dampen borrowing and, in turn, reduce demand for housing.

2. Stiffer Lending Standards
   In response to concerns about mortgage‑related risk, major banks have tightened their lending criteria, particularly for high‑debt borrowers. This has already led to a modest decline in the number of new home‑loan approvals in the past year.

3. Economic Slow‑Down
   The New Zealand economy is expected to grow at a slower pace than in the post‑pandemic boom. Lower income growth and a potential rise in unemployment would reduce households’ ability to finance new home purchases.

4. Supply‑Side Constraints
   Despite policy initiatives, the build‑out of new dwellings has lagged behind demand. Tight land markets in key regions such as Auckland, Wellington, and Christchurch mean that new construction costs are high and project timelines are long.

5. Global Headwinds
   The RBNZ’s model also incorporates external factors such as global commodity prices and exchange‑rate fluctuations. Rising oil and food prices, coupled with a stronger US dollar, can erode disposable income and reduce demand for housing.

What the Forecast Means for Stakeholders

Homeowners
For those currently holding mortgages, the forecast offers a glimmer of relief. Lower future prices could translate into reduced equity risk if they were to sell or refinance in the coming years. However, homeowners with long‑term fixed‑rate loans might still face high repayments, regardless of price changes.

Lenders
Banks and other lenders will likely re‑evaluate their exposure to mortgage risk. The predicted price decline could lead to higher default rates if borrowers’ equity positions deteriorate. This, in turn, may prompt stricter credit underwriting standards, further tightening the market.

Investors
Real‑estate investors—particularly those with portfolios concentrated in high‑priced regions—may need to adjust their strategies. The forecast indicates that a prolonged period of price decline is likely, meaning that holding or buying at the present level could be riskier than previously thought.

Policymakers
The RBNZ’s update underscores the need for continued policy focus on housing affordability and supply. While the central bank’s forecast signals a potential correction, it also highlights that the underlying structural issues—land‑use regulation, high construction costs, and limited urban growth corridors—need to be addressed to sustain a balanced housing market.

How the RBNZ Reached Its Conclusion

The RBNZ’s 2024 Housing‑Price Outlook is publicly available on its website, alongside a PDF detailing the methodology and assumptions. The model uses real‑time data from the New Zealand Treasury, the Reserve Bank, the Ministry of Housing and Urban Development, and the Real Estate Institute. Analysts note that the model places a strong emphasis on price‑to‑income ratios, which have risen to an unsustainably high level in recent years.

According to the RBNZ’s own documentation, the new forecast reflects a scenario where house‑price growth slows to near‑zero and eventually turns negative by the mid‑2030s. The RBNZ also warns that the market could experience a period of “softening” before any significant correction takes place.

Looking Ahead

The 20‑percent dip predicted by the RBNZ is not a call for panic, but a reminder that the New Zealand housing market is no longer immune to macroeconomic forces. With higher interest rates on the horizon, tighter credit, and a sluggish supply chain, the market may have entered a phase of gradual correction rather than the dramatic crash some feared.

For now, households and businesses can take comfort in the fact that the RBNZ is monitoring the market closely and is prepared to intervene if necessary. Meanwhile, the government’s housing‑affordability agenda—ranging from increased land‑supply incentives to reforms in zoning laws—remains crucial to ensuring that housing remains both affordable and accessible in the years ahead.

For a deeper dive, readers can review the RBNZ’s official “Housing‑Price Outlook” PDF on the central bank’s website, which provides a comprehensive breakdown of the assumptions and methodology behind this new forecast.