Peak dilemma

In late 2021, the property market was on a tear. First-home buyers cashed out their KiwiSaver, investors scrambled to get on board, and the fear of missing out was thick in the air. The national median hit $925,000 in November 2021 – Auckland peaked at $1.3 million; Wellington at $1 million.

Then the worm turned, and now, three years later, those who bought at the peak are living a particular kind of property hell: watching identical homes in their street sell for $100,000, $150,000, sometimes $190,000 less than they paid.

The numbers are brutal

According to an interest.co.nz analysis, roughly 136,000 residential properties were purchased between March 2021 and December 2022, right through the peak and into the downturn. Most of those properties are now worth less than their owners paid for them.

The national median has fallen 13% from its November 2021 peak. That’s $120,000 wiped off the value of an average New Zealand home. But regional variations tell an even grimmer story. Wellington is down 26% from its October 2021 peak – a $220,000 loss on the median property. Auckland has dropped nearly 20% from its peak, around $200,000 off the median.

QV data through October 2025 shows the average New Zealand home is still 13% cheaper than it was at the late-2021 peak. If you bought a $1 million property in Hamilton at the peak and it tracked the national market, it’s now worth around $848,000. That’s a $152,000 paper loss.

Negative equity isn’t just theoretical

The Reserve Bank estimated back in late 2022 that about 2% of mortgage holders were in negative equity, meaning they owe the bank more than their house is worth. If prices fell another 10%, that would jump to 7.3% of mortgages. A 20% fall from the peak? That’d be 18.3% of mortgages underwater.

We haven’t seen that worst-case scenario. But for those who bought at the absolute peak with a 10% deposit or, worse, those who used first-home buyer schemes with smaller deposits — negative equity is reality. Interest.co.nz estimated around 13,000 homeowners could be in negative equity, about 9.5% of those who bought during the peak period.

How it works: you bought in November 2021 at the median of $925,000 with a 10% deposit. Your mortgage was $832,500. Three years later, with minimal principal paid down (most of your repayments went to interest), you still owe around $820,000. But your house is now worth maybe $800,000, possibly less.

You can’t sell without bringing cash to settlement to cover the shortfall. You can’t refinance to a better rate because the bank won’t lend more than the property’s current value. You’re stuck watching identical homes in your street sell for dramatically less than you paid, knowing you’ve lost years of savings.

Worse for some than others

First-home buyers who scraped together deposits got hit hardest. Many took nine years to save a 10% deposit or cashed in their entire KiwiSaver. That money’s gone. The deposit they worked for through their twenties, wiped out by market timing.

Investors aren’t immune either. Mortgage adviser Geoff Bawden noted back in 2022 that he was seeing investors who’d bought second homes during the frenzy now facing financial hardship. One example: an Auckland investor looking to relocate to Queenstown remained stuck. They couldn’t sell their owner-occupied home because the value of their investment property had plummeted. Selling their main residence would have pushed the LVR on the investment property above the 60% threshold. The bank had a hold over both properties.

The advice everyone gives, but nobody wants to hear

If you’re in this situation, the standard advice is frustrating in its simplicity: don’t sell, keep paying your mortgage, wait it out. Property markets recover over time. New Zealand house prices historically trend upward. Just be patient.

That’s cold comfort when you’re watching a neighbour buy the same floor plan you paid $890,000 for $700,000. It’s particularly galling if your financial circumstances have changed – if you’ve lost your job, had a relationship breakdown, need to relocate for work, or simply can’t afford the mortgage repayments at higher interest rates.

The reality is negative equity only becomes a crisis if you need to sell or can’t keep up with repayments. As long as you’re employed, servicing the debt, and can sit tight, you’ll probably be fine eventually. But “eventually” could be a long time.

Will the improving economy help?

Maybe, but don’t hold your breath. Yes, the OCR has dropped to 2.25%. Yes, economists are forecasting modest house price growth through 2025–2026. But even if house prices grow 5% annually from here, it’ll take years to recover to November 2021 peak levels.

Let’s say you bought in Wellington at the peak for $1 million. You’re now at around $740,000 (down 26%). Growing at 5% annually, you won’t be back to $1 million until 2031. That’s six years of waiting just to break even.

Auckland buyers at the peak? Similar story. If you paid $1.3 million in November 2021, you’re now around $1.04 million. At 5% annual growth, you’re looking at 2029 before you’re back where you started. And that’s if growth averages 5% annually with no further downturns. No global shocks. No New Zealand recession. No spike in unemployment that tanks the market again.

The lessons for everyone else

This isn’t just a cautionary tale for those stuck. It’s a lesson for anyone buying property.

First, market timing matters. The old wisdom that “property always goes up” is true over decades, not necessarily over five years. If you buy at the peak, you could spend years underwater.

Second, deposit size is everything. If you’d bought that same $925,000 house with a 20% deposit instead of 10%, you’d have weathered the downturn with equity intact. The bigger your deposit, the bigger the buffer you have against market falls.

Third, don’t buy based on FOMO. Half the people who bought in late 2021 did so because they feared being permanently priced out. They weren’t wrong about housing affordability being a crisis; they were wrong about timing. Waiting another 12–18 months would’ve saved them $100,000–$200,000.

Fourth, stress-test your finances. If you’re stretching to buy at the top of your budget when interest rates are at record lows, you’re gambling that rates stay low, and property values keep climbing. Both assumptions proved catastrophically wrong for 2021 buyers.

Finally, understand that banks won’t save you. If you end up in negative equity but keep making repayments, the bank won’t foreclose – they have no interest in forcing a sale that leaves them short. But they also won’t help you sell and move on. You’re stuck until the market recovers or you can bring cash to settlement.

Where to from here?

For those trapped, there aren’t great options. You can try to increase your property’s value through renovations, though that requires capital you might not have. You can increase repayment frequency to pay down principal faster. You can rent out rooms to cover costs. Or you can simply wait and hope the market recovers before your circumstances force a sale.

The improving economy might help eventually. Lower interest rates, higher farm incomes, more infrastructure spending, increased tourism – all that could drive demand and push prices up. But it’ll be a slow grind, not a sudden recovery.

If you’re one of the 136,000 who bought during the peak period, you’re not alone. And you’re probably not in as dire straits as you feel. Most property owners with standard 20% deposits still have equity, just less than they started with. But if you bought with a smaller deposit in Wellington or Auckland in late 2021, watching identical homes sell for $190,000 less while you’re locked into your mortgage is a special kind of torture.

The market giveth, and the market taketh away. This time, it took a lot.

Need advice on your property situation? The team at Goodwins can help you navigate your options. Call 0800 GOODWINS.