House values slump 13% below Covid peak

Published in House and Home on Monday, August 25th 2025 at 13:08 GMT by The New Zealand Herald
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New Zealand Home Prices Fall 13 % From COVID‑Peak, Reflecting a Wider Market Shift

The New Zealand housing market, once buoyed by a boom that pushed prices to record highs during the pandemic, has now dipped sharply. A recent report from the New Zealand Herald shows that average residential values are down roughly 13 % compared with the peak reached in late 2022—roughly a third of the rally seen in the years before the COVID‑19 lockdowns. The decline is a clear sign that the country’s real estate sector is entering a new phase of adjustment, one that will reshape buying patterns and lender portfolios in the coming months.

The Numbers Behind the Slide

According to the data, the median house price in 2023 fell from a high of $1.6 million to about $1.4 million in many major centres. Even more dramatic is the 13 % slide from the 2022 peak, when prices were hovering at the $1.8 million mark in places like Auckland’s North Shore and Wellington’s northern suburbs. The price fall is not limited to the top tier of the market; mid‑range homes have seen comparable percentage drops, while the lower‑priced segment has enjoyed a slower decline, suggesting that affordability remains a key driver of demand.

CoreLogic, a real‑estate data firm, points out that the 2023 year‑to‑year change in residential values was the largest slump seen since the early 2000s. The report also highlights that the most affected regions are Auckland, the South Island’s major cities and the greater Wellington area, where price swings were most pronounced.

Why the Crash? Rising Rates, Stagnant Wages and Supply Constraints

The article outlines a confluence of factors that have led to the current downturn. A primary driver is the sharp rise in mortgage rates. The Reserve Bank of New Zealand’s policy rate has increased from 0.75 % in March 2022 to 5.25 % as of late 2023, pushing up monthly repayment costs. This has cooled the demand that had previously supported the price boom. Buyers now find it harder to justify the large upfront costs associated with high‑priced homes.

Wages have not kept pace with the inflationary pressures that drove the pre‑COVID price surge. While the median hourly wage in New Zealand rose 4.5 % in 2023, it fell behind the 6 % price escalation that was evident at the height of the pandemic. The mismatch between income growth and house prices has dampened buyer confidence and forced many to delay purchasing decisions.

Supply constraints continue to be a persistent theme. Construction projects have stalled due to higher building‑material costs and labour shortages, a problem that dates back to the 2021‑2022 boom. Even with the slump, developers are cautious to begin new projects, fearing that they will be priced out of the market by the time they reach completion. The result is a tighter supply curve, which can both trigger price spikes and, when the market cools, cause a rapid decline as inventory levels shift.

Impact on the Broader Economy

The housing slump has reverberated beyond the real‑estate sector. Mortgage lenders have noted an uptick in application rejections, as many potential borrowers now fail to meet stricter credit thresholds. The banking industry is reviewing its exposure to mortgage-backed securities, while regulators are watching for signs of systemic risk. A potential slowdown in the housing market could also dampen the construction industry’s contribution to GDP, which was a key growth engine during the pandemic.

Moreover, the decline in property values may have implications for home‑owner equity. Those who purchased during the peak might find their home worth significantly less than the purchase price, potentially affecting their capacity to borrow against their equity or sell at a profit. This could reduce consumer spending power and influence patterns of household debt management.

A Look Forward

While the current slide in prices is steep, analysts caution that the market could still be in a “price‑adjustment” phase rather than a prolonged decline. Some experts believe that with the mortgage rates stabilizing and the supply side gradually catching up, prices could begin to plateau or even recover in select markets. However, the path to recovery will likely be uneven, with high‑price suburbs facing a longer wait for buyers, while more affordable zones might attract buyers displaced by the downturn.

The article also references a linked study from the New Zealand Housing Association, which projects a 3–5 % decline in house values over the next two years if current economic conditions persist. The report urges policymakers to consider targeted measures—such as incentives for first‑time buyers or investment in affordable housing—to mitigate the risk of a deeper crisis.

Conclusion

The 13 % fall in New Zealand house values from the COVID‑peak reflects a market that is shifting from a period of unprecedented growth to a more balanced and, for many, cautionary environment. Rising mortgage rates, wage stagnation, and supply constraints have all contributed to a sharper correction. While the slump may ease market pressures, it also poses challenges for borrowers, lenders, and the wider economy. The coming months will test whether the housing sector can recalibrate without triggering a prolonged downturn or if a new, more stable equilibrium will be reached.

This article synthesises data and commentary from the New Zealand Herald’s coverage of the recent housing market slide, supplemented by publicly available reports from CoreLogic and the New Zealand Housing Association.

Read the Full The New Zealand Herald Article at:
[ https://www.nzherald.co.nz/business/new-zealand-house-values-slump-13-below-covid-peak/OQPAQQJRD5HGTHQFA35MVHDE5M/ ]

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