Market behaviour

After the pandemic binge and the brutal pullback that followed, New Zealand’s property market is behaving normally – steady, predictable, boring. 

From 1992 to 2019, average house prices in New Zealand rose by 6.8% per year, according to the REINZ nationwide House Price Index. That’s the number we all got used to and what drove investor behaviour for nearly three decades. 

But over the last six years, from 2020 until now, the average annual gain has been exactly 5%, following the speculative surge in 2020-2021, the hard crash in 2022-2023, and treading water through 2024-2025. This is certainly a far cry from the double-digit gains that convinced people property was a one-way bet. 

What agents are seeing 

Tony Alexander’s latest survey of real estate agents, conducted in early February 2026, paints a picture of a market that’s improving, but only just. 

Only 18% of agents reported seeing FOMO (fear of missing out), down from 26% in late November. For comparison, the six-year average is 29%, with a peak of 92% during the 2020-21 frenzy and a recent low of 5% in May last year. Buyer sentiment has improved slightly, but we’re nowhere near the level of urgency that drives rapid price growth. 

First home buyers still dominating; investors remain curious 

The market continues to be driven by first home buyers. A strong net 62% of agents saw more young buyers in the market, the best reading since the end of 2023. The average is 23%. First home buyers now make up around 28-29% of all transactions, a record high. 

Investors are still thin on the ground, with just a net 6% of agents reporting more investor activity. That’s above the average of a net 11% who typically say fewer investors are active, so investors haven’t disappeared. But they’re being selective, hunting for bargains, and paying much closer attention to yields than they did when capital gains felt guaranteed. 

Competing forces: interest rates vs. incomes 

Two key readings from the agent survey are heading in opposite directions. On the negative side, there’s been a sizeable jump in the percentage of agents who say buyers are worried about interest rates going up: from 2% two months ago to 27% now. That’s because the RBNZ has signalled the OCR cuts are done, and the OCR looks set to rise sooner rather than later, potentially as early as December 2026. 

But on the positive side, the proportion of agents who say buyers are worried about their incomes has fallen from 47% to 33%. Confidence in the jobs market is growing, the economy is recovering, and unemployment, which hit 5.3% in Q3 2025, is expected to stabilise and start falling through 2026. 

The price picture: Flat, with regional variation 

REINZ data for December 2025 showed the national median house price at $786,977, up 1.4% year-on-year. Auckland sat above $1 million for the third consecutive month at $1,015,000, also up 1.5% year-on-year. 

Twelve of sixteen regions recorded annual median price growth, but the gains were modest. Cotality’s Home Value Index tells a similar story: values fell 1.0% over the calendar year 2025, leaving the national median at $808,430, still 17.6% below the early 2022 peak. 

After falling in seven of the past nine months through 2025, early indicators suggest 2026 may bring a turnaround, driven by lower mortgage rates and a recovering economy. 

Most forecasters are picking modest growth. ANZ expects 2% house price growth in 2026 (revised down from 5% previously due to election uncertainty and the prospect of a capital gains tax). Westpac is forecasting 5.4%, and Cotality expects around 5%. 

Regional winners and losers 

The regional picture shows exactly what you’d expect in a mild cycle: variation without extremes. 

Southland continues to demonstrate strength, with each of the region’s three districts hitting new median value peaks in December. Parts of Canterbury have edged to new records as well. Otago and Southland have posted gains of around 2-4% over the past year. 

Meanwhile, Auckland and Wellington have seen particular softness. Auckland prices are down 1.5% year-on-year, while Wellington is down 2.8%. Both cities are dealing with elevated stock levels, Auckland from ongoing townhouse development, Wellington from public sector job losses and council/insurance cost pressures. 

But even in the softer markets, there’s no panic, no FOMO driving irrational behaviour. Just buyers taking their time, vendors adjusting expectations, and transactions happening at realistic prices. 

What’s driving the mild cycle 

The fundamental difference between this cycle and previous ones is supply. 

Building consents have remained robust — in November 2025, 3,517 new dwellings were consented, up 13.45% year-on-year. The 12-month rolling total rose 7.02% to 35,969 dwellings. 

At the same time, population growth has slowed: net migration is now around 15,000 annually, compared with 24,000 at the end of 2024 and 80,000 a year ago. 

Tony Alexander has been saying for years that the old 6.8% average wasn’t sustainable and that we should expect something closer to 5%. The pandemic binge delayed the adjustment, but we’re here now. 

Yields matter again 

For property investors, this is a different game than it was in 2015-2021. Back then, you could overlook a mediocre yield because capital gains of 10-15% per year made up for it. Now investors are paying far more attention to yields, and there’s widespread acceptance that prices will not rise at the speed they did on average from 1992. 

That doesn’t mean property investment is dead, rather it demands a close look at the numbers. A 5% annual capital gain plus a 4-5% yield still delivers solid returns. But you can’t rely on price growth alone to carry a weak cash flow position. 

The investors who are active in the market right now are hunting for bargains and looking at areas where rents are holding firm and vacancy rates are low. And they’re structuring their financing to handle modest interest rate increases over the next 18 months. 

The election factor 

There’s one wildcard in all of this: the November 2026 general election. 

Labour’s proposed 28% capital gains tax on investment properties is creating uncertainty, as are ongoing debates about interest deductibility, LVR settings, and DTI restrictions. 

ANZ downgraded its house price forecast for 2026 from 5% to 2%, specifically citing election uncertainty and the prospect of a capital gains tax keeping buyers on the sidelines. 

Kelvin Davidson from Cotality notes that in an election year, regulation will be a key area to watch, particularly around LVRs, DTIs, and capital gains tax debates. 

Elections always create uncertainty in the property market: buyers delay, sellers hold off, activity slows. That’s part of why most forecasters are picking a subdued first half of 2026, with any meaningful recovery pushed to the second half of the year. 

So where does that leave us? We’re settling into a cycle where: 

• House prices grow around 5% per year on average
• First home buyers continue to dominate transactions
• Investors return slowly and selectively
• Supply and demand stay roughly balanced
• Regional variation continues, but without extremes
• FOMO stays muted
• Buyers have time to make decisions 

This is actually good news. A mild cycle is a predictable cycle, forcing decisions based on fundamentals rather than trying to time a volatile market. 

We’ve had the binge, we’ve lived through the pullback, and now we’re settling into a pleasingly mild cycle. 

Need help navigating the new normal? Give us a call on 0800 GOODWINS and let’s talk about what makes sense for your portfolio in a 5% world.