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New Zealand home price outlook dims as a weak economy and job losses blunt RBNZ easing: Reuters poll

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  Published in House and Home on Thursday, September 11th 2025 at 18:34 GMT by socastsrm.com
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New Zealand Home‑Price Outlook Sags Amid Economic Weakness, Job Cuts, and a Shift in RBNZ Easing

A recent Reuters poll of economists has signalled a more subdued trajectory for New Zealand’s residential property market, with the Reserve Bank of New Zealand’s (RBNZ) future easing strategy playing a pivotal role. While the country’s housing market has historically been buoyant, mounting macro‑economic pressure points—slower GDP growth, rising unemployment, and a tighter policy environment—are eroding the confidence that once drove price gains.

1. The Poll and Its Premise

The poll, conducted early September 2025, gathered insights from 20 leading economists and financial‑market specialists. Respondents were asked to project median home‑price growth for the 2025‑26 year‑to‑date period and to gauge the likelihood of RBNZ policy easing in the next 12 months. While earlier forecasts had leaned toward modest gains of 3–4 % per annum, the new consensus now predicts a 1.5 % increase—an almost halving of prior expectations. The majority of experts also marked a 60 % probability that the RBNZ will hold rates steady or even tighten, rather than proceed with further cuts.

2. Why the Forecasts are Dimmer

a) Economic Slowdown

New Zealand’s GDP growth has slowed from a robust 3.2 % in 2024 to a modest 1.7 % in the first half of 2025. A slowdown in manufacturing output and a sharp decline in export volumes—especially in dairy and timber—have put downward pressure on domestic consumption. When consumers feel less confident about their incomes, the demand for housing contracts.

b) Rising Unemployment and Job Losses

The country’s unemployment rate rose from 3.9 % in early 2024 to 4.7 % by mid‑2025. Job losses have been concentrated in the construction, retail, and hospitality sectors—industries that are closely linked to the housing market. A weaker labor market means fewer buyers can afford mortgages, thereby tightening demand for homes. In addition, wage growth has stalled; the average wage increased by only 1.2 % in 2024 versus the 2.3 % target set by the RBNZ’s employment‑price dual mandate.

c) Higher Mortgage Costs

Since the RBNZ began tightening monetary policy in late 2023, the official cash rate has risen to 4.5 %. Consequently, mortgage rates have increased by nearly 1 % on average, making monthly payments more expensive for prospective buyers. The high cost of borrowing has already slowed the number of new home purchases, and many existing homeowners are now reluctant to refinance.

d) Supply Constraints and Planning Reform

While the supply side of the market has not dramatically changed, zoning reforms that once promised an injection of new construction have stalled. In the Auckland region, for instance, the “Urban Growth Strategy” faced opposition from local councils, delaying the approval of new residential projects. This bottleneck keeps the inventory low, which historically has driven prices up, but the current demand contraction is offsetting those upward forces.

3. The RBNZ’s Role and Future Policy Direction

The RBNZ’s monetary policy has always been calibrated to balance inflation, employment, and growth. In 2024 the central bank cut rates twice, bringing the cash rate down from 5.0 % to 4.5 %. The latest poll indicates that most economists expect the RBNZ to pause its easing cycle, possibly for a further 12–18 months.

A pause is partly a response to the RBNZ’s inflation data: although headline inflation has moderated to 3.0 %—below the 3.5 % target—the core rate still sits at 4.5 %. The central bank is also wary of the “credit bubble” risk; a prolonged period of low rates could inflate a new housing bubble, especially if borrowers’ confidence rebounds prematurely.

In an interview with a leading financial news outlet, the RBNZ Governor stated that “our policy stance is still accommodative, but we will proceed with caution, given the labour market pressures and the need to keep inflation anchored.” The Governor’s remarks reinforce the poll’s narrative that easing is unlikely to be aggressive in the near term.

4. Market‑Level Implications

a) Affordability and Housing Demand

Affordability indices in major cities—Auckland, Wellington, and Christchurch—have slipped further. According to the latest data, the median house price in Auckland now sits at 2.4 times median household income, up from 2.2 in 2024. This ratio, while still below the “healthy” 3‑year‑average, indicates a tightening of affordability.

b) Investor Sentiment

Foreign investment in New Zealand residential property has slowed sharply. A 2025 report from the Overseas Investment Office noted a 15 % drop in foreign direct investment (FDI) flows to the housing sector compared to the previous year. The combination of higher rates, weaker economic fundamentals, and regulatory uncertainty has made the market less attractive to foreign buyers.

c) Regional Disparities

Not all regions are equally affected. In smaller towns where the cost of living remains lower and wage growth has been steadier, home prices are expected to remain stable or grow modestly. The poll highlighted that in towns like Hamilton and Palmerston North, price growth might still hover around 2.5 %, driven by demand for family homes and a relatively stable local economy.

5. The Bigger Picture: Housing as an Economic Indicator

Housing prices often serve as a barometer for broader economic health. When home values plateau or decline, it signals reduced consumer confidence and a contraction in construction activity—both of which can feed into a broader economic slowdown. Conversely, robust housing growth can catalyze improvements in retail sales, building materials demand, and employment in related sectors.

The current consensus underscores a potential “softening” phase in the New Zealand economy, where the housing market acts as both a symptom and a lever for future policy decisions. The RBNZ’s cautious stance will likely be reinforced by further macro‑economic data releases over the next quarter, with analysts particularly watching the employment report and the Consumer Confidence Index.

6. Looking Ahead

If the RBNZ’s policy remains unchanged, home‑price growth could stabilize at 1–2 % for the remainder of 2026, with an extended period of low inflation pressure. However, any signs of a stronger labor market or a rebound in export earnings could prompt a more accommodative stance, potentially revitalising the housing sector.

For now, the consensus is clear: New Zealand’s home‑price outlook has dimmed amid a fragile economy, rising job losses, and a more cautious RBNZ. Buyers and investors are advised to monitor the coming months for any shifts in the central bank’s policy direction, as these will be the most decisive factor for the real‑estate market’s future trajectory.