Prices in the mid-2030s are expected to be around 20 per cent lower than their 2021 peak when adjusted for inflation. This outlook, provided by economic consultancy Infometrics, suggests a slow recovery from the market highs reached during the pandemic housing boom.
While nominal house prices are tipped to edge upward over the coming years, they may not surpass 2021 levels until mid-2029. Adjusted for inflation, however, they are expected to remain considerably below peak values for much longer. This extended downturn is viewed as one of the most prolonged housing corrections in modern times.
Infometrics is predicting house price inflation to average 3.1 per cent per annum over the five years to June 2030. The analysis echoes the sentiment from Cotality (formerly CoreLogic), whose latest data shows that while buyer activity is increasing, property values remain largely stagnant. So far in 2024, prices have only increased by about 0.5 per cent, and the more optimistic forecasts suggest a modest end-of-year lift of 2 to 3 per cent.
Cotality’s chief property economist notes that house prices are sitting approximately 16 per cent below their pandemic-era highs. At a moderate annual growth rate of 5 per cent, a return to those levels could take another three years. If growth sits closer to 2 or 3 per cent, that timeline extends to five or six years.
This situation marks a slower recovery cycle than in previous downturns. Following the GFC, it took around five years for house prices to bounce back. With the current slump already in its fourth year, a full recovery could take seven years or more. Unlike the GFC period, the current market faces additional headwinds, such as tighter lending rules, including debt-to-income and loan-to-value restrictions.
Other economic commentators, including those from ANZ and Westpac, point out that the path ahead remains uncertain. High property listings, a softening labour market, and ongoing economic uncertainty are contributing to buyer hesitancy, even as interest rates begin to ease.
Despite the market’s sluggishness, there is a silver lining for prospective buyers. Slower price growth and a broader period of correction may offer better purchasing opportunities and help address long-standing affordability challenges.
The current phase of realignment may ultimately contribute to a more sustainable and balanced housing market. As New Zealand continues through this cycle, the focus will remain on steady, inflation-conscious growth rather than rapid price escalation.
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