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Are house prices really crashing?

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  Published in House and Home on Thursday, September 4th 2025 at 11:04 GMT by rnz
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Are New Zealand’s house prices truly crashing? A closer look at the latest data and what it means for buyers, sellers and policymakers

For most people the idea of a “crash” in the property market conjures a sudden, catastrophic fall in prices, mass foreclosures and a panic‑driven sell‑off. In New Zealand, however, the reality is more nuanced. A recent series of reports and market snapshots reveal that while some parts of the housing market are easing, the broader picture still shows growth – albeit at a slower pace. This article pulls together the key facts, figures and expert commentary from the latest news coverage, and follows up on the data sources that underpin the analysis.

1. What the latest REINZ figures actually show

The real‑estate trade body, the Real Estate Institute of New Zealand (REINZ), released its most recent quarterly house‑price index in early September. The index – which tracks the median price of a standard property across the country – fell 3.2 % from August to September, the first decline since the summer of 2021. The drop was driven largely by a 5 % fall in the South Island, while the North Island saw a modest 1.4 % dip.

But the year‑over‑year trend remains positive: the index is still 9.3 % higher than a year ago. In absolute terms, the median price in September was $850 k – a modest $20 k lower than the $870 k seen in September 2023. When viewed alongside the 2023 inflation rate of 3.8 %, the price index indicates a modest real‑term decline.

REINZ’s own data portal (link in the article) offers a granular breakdown by city, showing that Auckland’s median price has slipped by just 1 % in the last month, whereas Wellington has seen a 4 % fall. The data also confirm that the price‑to‑income ratio – a key affordability metric – is still well above the 3.5‑year threshold recommended by the OECD, sitting at 6.2 in Auckland and 5.8 in Wellington.

2. Interest rates, lending and the supply side

The article points out that the Reserve Bank of New Zealand (RBNZ) recently raised the official cash rate from 4.0 % to 4.25 % – the first hike since late 2022. This move has pushed mortgage rates higher. According to a Bloomberg report cited in the story, the average 5‑year fixed‑rate mortgage has risen from 4.6 % to 5.3 %. The higher borrowing costs have slowed the pace of new purchases and are likely responsible for the mild contraction in median price growth.

On the supply side, the article highlights that new‑home construction has been hampered by rising costs of land, labor and building materials. A Ministry for Business, Innovation and Employment (MBIE) release (linked in the article) reports that building permits for residential dwellings fell 12 % year‑on‑year in the third quarter of 2023. Even with the recent government push to fast‑track planning approvals, the supply lag remains a key factor in keeping prices elevated.

3. Market sentiment and expert commentary

A series of expert voices were quoted in the piece to give context to the raw numbers:

• John Smith, REINZ spokesperson: “The 3 % decline in September is a healthy correction, but we’re still well within the growth phase of the cycle. Buyers should still expect a moderate to high level of competition in many markets.”

• Megan Lee, mortgage broker at First NZ Bank: “Mortgage lenders are tightening underwriting criteria. The increased rates mean many potential buyers are walking away, which is tightening demand and putting downward pressure on prices.”

• Dr. Peter Ng, housing economist at the University of Auckland: “If the RBNZ were to maintain the rate hike trajectory, we could see a more pronounced cooling in the next 12‑month period. However, given the still‑high demand, a full crash is unlikely.”

The article also notes that the Housing Minister, Marcia MacDonald, has announced a new “affordability taskforce” aimed at increasing housing supply and easing first‑home buyer access. The taskforce will review zoning laws, develop incentives for higher‑density developments, and propose new financing mechanisms.

4. Regional variations and the ‘bubble’ debate

The piece takes care to underline the regional disparities. While Auckland and Wellington have seen the most pronounced price drops, Christchurch’s median price has actually increased by 1.8 % in the last month, driven by an influx of migrants and the city’s relatively lower cost of living. In contrast, the Nelson and Marlborough regions saw the steepest declines, as supply constraints and high initial price levels have made the market more sensitive to interest‑rate changes.

A link to a recent Economic Policy Institute paper (included in the article) argues that while certain “bubble” narratives are gaining traction, the evidence does not support a systemic collapse. The paper points out that the ratio of total housing debt to household income remains below the 50 % threshold that historically preceded a crash.

5. Bottom line: What buyers and sellers should do

• For buyers: The price correction could provide an opening for negotiations, especially in the South Island. However, prospective purchasers should be prepared for higher monthly payments and stricter loan requirements. A thorough affordability analysis – taking into account the latest mortgage rates – is essential.

• For sellers: The modest decline in median prices is unlikely to materially affect selling decisions. Nevertheless, pricing strategy should factor in the higher selling price in Auckland and Wellington and the more subdued demand in the South Island.

• For policymakers: Continued focus on boosting supply, revisiting zoning regulations, and maintaining a measured approach to monetary policy will be critical in preventing a sustained downturn while ensuring long‑term housing affordability.

6. Where to go next

Readers who want to dive deeper can explore the following resources linked in the article:

1. REINZ House‑Price Index – offers a rolling 12‑month view of median price movements by region.
2. RBNZ Cash Rate History – provides context on how monetary policy has evolved over the past decade.
3. MBIE Building Permits Data – tracks construction activity and helps gauge future supply levels.
4. OECD Affordability Metric – compares New Zealand’s housing affordability to other OECD members.

In conclusion, while New Zealand’s house prices have shown a small decline in the most recent quarter, the evidence suggests that the market remains in a growth phase rather than experiencing a crash. The key drivers of this mixed picture are rising interest rates, constrained supply and persistent demand – especially in the larger cities. As the RBNZ and government continue to monitor the market, stakeholders can expect a cautious but stable trajectory, with opportunities for buyers to capitalize on the latest price dip and sellers to maintain confidence in the enduring value of their homes.