PHOTO: First home buyer. FILE
Housing Market Predictions for 2025: What to Expect for Prices, Sales, and Rentals
The New Zealand housing market is set to shift gears in 2025, with economists predicting a moderate increase in house prices over the next 12 months. While the exact rate of growth remains uncertain, a combination of factors—including lower interest rates, improved consumer confidence, and a stabilizing labor market—are expected to play a significant role in shaping the property landscape.
2024: A Year of Balance and Uncertainty
The housing market in 2024 was marked by a balance between opposing forces. Falling interest rates provided some relief to buyers, but this was countered by labor market uncertainties and a surplus of properties for sale. This equilibrium kept house prices relatively flat throughout the year.
2025 Outlook: A Gradual Rebound
Economists now predict that the downward pressure on interest rates will start to take effect in 2025, paving the way for a modest recovery in the housing market.
Westpac’s chief economist, Kelly Eckhold, forecasts an 8% increase in house prices over the year. This would represent a significant shift compared to the stagnation of 2024.
“A lot of the indicators of the housing market have shown a pretty significant turnaround because interest rates have fallen quite a long way very quickly,” Eckhold explained.
While the predicted 8% growth is above the long-term average of 6.5%, it pales in comparison to the dramatic price surges of the past 15 years, which saw annual increases of up to 20%.
Supply and Demand in Harmony
The housing market appears to have reached a healthy balance between supply and demand, with the number of available properties expected to decrease steadily. Eckhold anticipates that the pick-up in house prices will begin as early as the first quarter of 2025, driven by a mix of factors:
- Improving consumer confidence
- Noticeably lower interest rates compared to the past three to four years
- A recovering economy
The labor market is also expected to stabilize, with unemployment predicted to peak in the second quarter of the year before improving.
Market Activity on the Rise
Nick Goodall, Corelogic’s head of research, estimates that the number of property transactions will climb to 90,000 in 2025, an increase of 10,000 from 2024. He projects a 5% growth in house prices, attributing much of this to the impact of falling interest rates.
“The big difference for 2025 will be interest rates,” Goodall said. “They’re falling now and will be sustainably lower next year as opposed to this year, when they have been constraining for the majority of the year.”
However, he noted that certain constraints, such as high property listings and rising unemployment, would continue to temper growth. Debt-to-income ratios could also emerge as a limiting factor in the latter half of the year.
Additional Perspectives on Price Growth
- ANZ economists predict a 6% rise in house prices over the year.
- Gareth Kiernan, Infometrics chief forecaster, expects house sales to show a slight upward trend through mid-2026, with an annual increase of 3.7% in 2025. He noted that while lower interest rates would drive market activity, slower population growth and a soft labor market could constrain momentum.
The Rental Market: A Slower Pace
The rental market, which experienced sharp increases in recent years, saw a notable softening in 2024. This trend is expected to continue into 2025, influenced by factors such as weaker net migration and a stabilizing labor market.
Kiernan predicts that rental growth will remain subdued until at least mid-2025, while Eckhold suggests that rents, which had been rising at unsustainable rates, will decelerate further due to reduced population growth and moderating wage inflation.
Challenges and Opportunities in Construction
The construction sector faces its own set of hurdles as consent numbers appear to have bottomed out, and activity is likely to remain weak. However, new builds may offer a viable option for buyers restricted by loan-to-value or debt-to-income limits.
Nick Goodall emphasized the importance of confidence in the stability of construction firms, particularly given the timeframes involved in building new homes.
A Measured Recovery
While 2025 is expected to bring a rebound in the housing market, the growth will likely be measured rather than meteoric. Economists agree that while falling interest rates and improved economic conditions will drive demand, lingering constraints—such as high property listings and labor market challenges—will temper the pace of recovery.
Both buyers and renters can expect a more stable market environment in 2025, with moderate price increases and a steady supply of options. For those considering entering the housing market, the coming year may offer an opportunity to take advantage of lower interest rates and a recovering economy.