Residential Housing Prices

IBISWorld forecasts the price of residential housing to rise by 12.4% in 2024-25, to 105.4 index points. Residential housing prices in New Zealand have spiked after a temporary decline in 2023-24. House prices are soaring in the current year after a major surge in demand and the slow-moving nature of housing supply. During the pandemic, migration collapsed when the international border was shut. Migration has gradually rebounded, which is intensifying pressure on the housing supply. In addition, the RBNZ is forecast to start reducing the official cash rate, which will further stimulate a rise in demand, contributing to an expected steep rise in residential housing prices in 2024-25.

The pandemic was a major driver of volatility in residential housing prices over the past five years, upending both supply and demand for housing in New Zealand. For much of the past decade, an extended period of very low interest rates drove investment in housing, putting upward pressure on prices. In the early stages of the pandemic, interest rates were reduced to record lows in an attempt to offset the negative economic effects of the pandemic. Investment flooded in from both owner-occupiers and property investors. At the same time, pandemic-related restrictions to both labour and material supply heavily undermined housing supply and put further upward pressure on prices in the residential property market. These imbalances in supply and demand caused a major surge in residential housing prices in 2020-21 and 2021-22.