House prices hold steady: could Reserve Bank rate cuts stop here? Six signals explain New Zealand's housing outlook as CVs fall, policy reverses and inflation rises

New Zealand's housing market stands at a crossroads of policy and market forces: widespread reductions in CVs (council valuations) are unsettling sentiment, signals are emerging that a July rate cut could be put on hold, and Housing Minister Chris Bishop's reversal on medium-density policy last week has added a new variable on the supply side.

 

Everything points to one conclusion: in the second half of 2025, New Zealand's property market is unlikely to simply reap the benefits of lower interest rates. Instead, it must confront a more complex period of competing forces.

 

1 CVs fall, but sale prices show little movement

 

Auckland Council's newly released council valuations (CVs) show an average citywide reduction of 9%. For many homeowners, this fall in value on paper is a blow, but its impact on actual sales is relatively limited. As Cotality chief economist Kelvin Davidson put it: “Whether CVs rise or fall, homes listed now will not be priced any differently from two weeks ago.”

 

These valuations are actually based on market data from May 2024, so there is a clear lag. For most households, council rates have risen even as CVs have fallen, delivering a combined psychological blow and financial squeeze. The real concern is the new bill, rather than the CV.

 

2 The housing market is recovering, but slowly

 

The data does show that New Zealand's property market is warming up. Cotality's latest figures indicate that house prices nationwide have rebounded somewhat since May last year. But economists generally stress that while a recovery is happening, it is very slow and highly uneven.

 

Economist Kelvin Davidson identified labour market weakness and a lack of buyer confidence as the biggest obstacles to recovery. Kiwibank's analysis is more pessimistic: in its latest economic forecasts, it described its earlier expectations for a house price rebound as “overly optimistic” and lowered its full-year house price growth forecast for 2025 from 5%–7% to just 2%–3%.

Kiwibank chief economist Jarrod Kerr's team said: “New Zealand's economy is slowly crawling out of last year's deep recession, but nowhere near as quickly as imagined. High stock levels are suppressing the price rebound, and the housing market remains in a phase where recovery is not yet secure and confidence remains unsettled.”

 

They also noted a divergence in market activity: first-home buyers are active, while investors remain on the sidelines. Many investors are concerned about future policy settings, such as possible tightening of the bright-line test or interest deductibility rules. They will only return to the market in large numbers once house prices clearly recover and the rebuilding of asset values improves.

 

On the OCR, Kiwibank maintains its longstanding view that the Reserve Bank needs to cut the rate further to 2.5%, well below its current 3.25%. It stressed: “The policy stance needs to shift from restraining the economy to supporting it.”

 

Kelvin Davidson offered a representative assessment: “The housing market is certainly better than last year, but it can absolutely not be described as strong.”

 

3 Falling net migration puts pressure on both rents and homebuying demand

 

Figures for April 2025 show New Zealand's annual net migration has fallen to 21,300, a two-year low and well below the long-term average of 31,900. Although migration's direct impact on house prices is weakening, its effect on the rental market cannot be overlooked.

Fewer new migrants mean lower rental demand, challenging landlords' returns. This also weakens underlying homebuying demand in some areas, with Auckland, Christchurch and Hamilton particularly affected.

 

4 Inflation and GDP: a July rate cut could be put on pause

 

Two key sets of figures due this week — the May Selected Price Indexes and first-quarter GDP growth for 2025 — will directly influence the Reserve Bank of New Zealand's interest rate decision at its 9 July OCR meeting.

Markets currently expect GDP growth of around 0.7%, well above the 0.4% projected in the Reserve Bank of New Zealand's May Monetary Policy Statement. Major banks including Westpac and ASB have raised their forecasts, seeing a significant economic recovery from late last year as manufacturing sales rose 2.4%, wholesale sales increased 3.2% and retail sales grew 0.8%. Construction has also ended six consecutive quarters of contraction.

 

ASB analysts described this as “a sign of an uneven economic recovery”: external trade, including dairy, timber, fruit and vegetable exports, is performing well, but household consumption and construction remain fragile.

 

Kiwibank, however, maintains that the recovery is “weak and slow”, nowhere near strong enough for the Reserve Bank to stop providing stimulus. It forecasts full-year GDP growth of just 0.9% and stresses: “Only further monetary easing can truly ignite domestic demand and consumption.”

 

The July OCR meeting therefore becomes an important point to watch:

 

• If GDP exceeds expectations, the Reserve Bank may press pause;

• If the details show an unsteady recovery, the Reserve Bank could still continue cutting rates below 2.5%;

• If signs of recovery continue to broaden, a genuine turning point in monetary policy may arrive before the end of this year.

   

  5 Buyers and sellers remain deadlocked, with low sales volumes hard to lift

   

  Although mortgage rates have fallen from above 7% to around 5%, market activity has yet to recover noticeably. Sellers still cling to expectations based on the 2021 peak and are reluctant to cut prices substantially. Buyers, meanwhile, are troubled by lower CVs, unstable incomes and policy uncertainty, and worry about paying too much.

   

  Independent economist Tony Alexander's monthly survey of real estate agents shows that only 21% believe buyer confidence is stable, while 56% say buyers are worried about their future incomes. This psychological stalemate has turned the market into a tug of war over who will compromise first.

   

   

  6 Medium-density policy returns to major cities, reshaping supply expectations

   

  As market attention centres on Reserve Bank decisions and CV trends, Housing Minister Chris Bishop's latest decision has introduced a new variable.

Before the 2023 election, National opposed the Medium Density Residential Standards (MDRS), advocating greater autonomy for councils. Now the position has reversed: cities including Hamilton, Tauranga and Wellington must continue implementing MDRS and cannot opt out. Bishop said that, given most cities had already spent years completing intensification planning, overturning it would simply “achieve nothing and waste taxpayers' money”.

 

Meanwhile, Auckland and Christchurch have been allowed to develop tailored housing plans. Auckland Council will withdraw its earlier PC78 proposal, which was interrupted by flooding, and instead develop an intensification plan centred on the City Rail Link, prioritising greater density around stations.

 

This means that in Mount Eden, Kingsland, Morningside and similar areas, buildings of at least six storeys will be permitted within a ten-minute walk, with heritage protections and sunlight restrictions weakened. Mayor Wayne Brown voiced support: “Moderate intensification is reasonable in areas where infrastructure is in place.”

 

Christchurch has also been allowed to depart from the original MDRS pathway, provided it develops an alternative plan that can accommodate 30 years of housing growth. Recommendations from an independent review panel to limit density and control sunlight impacts in some areas have been rejected by the housing ministry.

 

These measures reshape the framework for urban development and send developers a clear signal about the benefits of greater density. For the property market, a clearer supply outlook could bring a new balance to the pace of future supply and the price structure.

 

What do you think?

 

Lower CVs, stagnant house prices, uncertain rate cuts… Are you also caught between buying and holding off, waiting and acting? Where do you think New Zealand's housing market will head in the second half of 2025?

 

Share your views in the comments as we interpret market signals together and explore how to respond.