NZ property market: the lay of the land

Over the past six-to-eight months the New Zealand property market has told two stories. The first is domestic – an economy slowly thawing after its deepest freeze in years, interest rates substantially lower from the 5.5% peak in mid-2024, and buyers finally re-entering a market that has been, by most measures, decisively in their favour.  

The second story arrived without warning on the last day of February: the United States and Israel launched large-scale strikes on Iran, triggering a conflict that has since rattled global energy markets, pushed oil prices sharply higher, and introduced a new layer of uncertainty over the recovery everyone was banking on. 

So where does that leave the New Zealand property market right now? 

The economy is finally moving, but fragile 

After contracting in 2024, New Zealand’s economy has been grinding its way back. The Reserve Bank held the OCR at 2.25% at its February 2026 meeting, having slashed rates from 5.5% in mid-2024 – one of the most aggressive easing cycles in the RBNZ’s history. GDP rose 1.1% in the September quarter, construction and business investment are picking up, and the OECD projects 1.8% growth for 2026 rising to 2.8% in 2027. 

The Treasury’s Half Year Economic and Fiscal Update projected real GDP growth of 1.7% in 2025/26, accelerating to 3.4% in 2026/27 – a stronger rebound underpinned by lower interest rates, rising house prices, and firmer commodity export earnings. 

Agriculture and the regions are leading the way; Southland and Otago are outright booming. The laggards are the two big cities – Auckland and Wellington – still weighed down by elevated listings, public sector job losses in the capital’s case, and a buyer cohort that has been burned before and isn’t rushing. 

Unemployment peaked at 5.4% and is expected to ease gradually through 2026 as the recovery broadens. The RBNZ noted in February that the labour market is ‘stabilising’ and is ‘expected to continue to strengthen’ as economic activity picks up. But jobs confidence remains a key psychological handbrake on property buyers. As independent economist Tony Alexander has observed, buyers currently worry most about jobs and incomes. Until that changes**,** expect continued caution despite the rate tailwind. 

Inflation wildcard 

Heading into 2026, inflation was already nudging the top of the RBNZ’s 1–3% target band. Annual CPI came in at 3.1% at end-2025, and the RBNZ signalled the OCR would stay on hold for most of the year while it gains confidence the recovery is sustainable. Administered prices, including council rates, electricity lines charges, have been stubbornly sticky, even as tradables inflation eases. The central bank expects inflation to return to the 2% midpoint over the next 12 months, but that forecast was written before February 28.  

The Iran conflict has changed the inflation calculus materially. Earlier this month Finance Minister Nicola Willis revealed Treasury’s “worst-case” scenario, which assumed a long conflict, was for inflation to rise from 3.1% now to 3.7%. She noted that this worst-case scenario had inflation peaking lower than the current inflation rate in Australia, which is 3.8%. 

Westpac estimates that under a scenario where only Iranian supply is disrupted, New Zealand’s CPI rises by around 1 percentage point and GDP falls by 0.4 percentage points. A three-month Strait of Hormuz disruption could lift CPI by 3 percentage points and reduce GDP by 0.7 percentage points. Westpac chief economist Kelly Eckhold cautioned: “Right now, we’ve got a 2.6% inflation forecast for the June quarter. If there’s a reasonably long-lived shock, that would be nudging it back up to that 3% level.” 

For the property market, the concern is less about an immediate OCR hike (the RBNZ has signalled it would look through a supply-side shock) and more about the dampening effect on consumer confidence and household spending power that higher petrol, food, and freight costs create. A tax on every trip to the supermarket is a tax on property market momentum. 

The Iran war 

On February 28, 2026, the US and Israel launched coordinated strikes on Iran. Iran responded within hours with ballistic missiles and drones across the region. The Strait of Hormuz, through which roughly 20% of the world’s oil shipments travel, has been heavily disrupted, with Iran announcing its closure even as vessel tracking shows reduced rather than completely halted traffic. 

The Ministry of Foreign Affairs and Trade assessed New Zealand’s direct exposure as relatively contained: $3.4 billion in exports to Middle Eastern countries (about 3% of total), with dairy products accounting for nearly 70% of that. The bigger risk is indirect, involving Asian refineries. New Zealand imports its refined petroleum from South Korea, Singapore, Malaysia and Japan, all of which are heavily dependent on Middle Eastern crude. As the MFAT report noted: “If supply from the Persian Gulf is disrupted then these Asian refineries will be forced to compete for oil supply from elsewhere, putting upward pressure on global oil prices.” 

Petrol prices have already climbed sharply, reaching $4 a litre in some places, while the price of diesel has crept over $3 a litre in some parts of the country. Brent touched US$116 in the week following the initial strikes. Air New Zealand has already raised fares and suspended its 2026 financial outlook. 

Finance Minister Nicola Willis confirmed New Zealand has around 50 days of fuel supply, and has formed a Ministerial Oversight Group with PM Luxon to monitor the fallout. Willis was candid about the downside risk: “The worst-case scenario would have inflation continuing to rise in a way that affects every family filling up their car at the pump, but also adds costs across our economy.” Fertiliser prices are another exposure point: urea, essential to NZ farming, has already doubled in some Middle Eastern markets as the Strait tightens. 

Markets have so far been relatively calm given the situation is one of the biggest events in that part of the world since the Iraq war. But the unknowns are material, and the RBNZ’s next rate decision on 8 April will be one to watch.  

House prices 

The national median house price sits at $753,106 as at January 2026, still materially below the November 2021 peak. Cotality’s Home Value Index shows national values have recovered just 1.91% since bottoming out in May 2023, leaving them down roughly 17.6% from their peak. The picture varies sharply by region: Wellington is down 26.94% from its October 2021 peak; Auckland is off 23.57%. Meanwhile, Southland hit record median values in December, and provinces like New Plymouth and Queenstown are ticking upward. 

Buyers will relish improved affordability, which is at its best level in several years, according to Cotality chief property economist Kelvin Davidson. Forty to fifty percent of existing mortgages are about to refix onto lower rates, injecting real cash flow relief into household budgets. 

Annual sales rose 10.3% in 2025 compared with 2024, reaching 80,655 nationally according to REINZ’s year-end review. And February 2026 saw new listings surge 7.8% year-on-year to 12,252 – the highest February level since 2013, according to realestate.co.nz. Crucially, total stock is only rising at 1.8%, suggesting properties are being sold through rather than piling up. Three regions – Southland, Central Otago/Lakes, and Otago – recorded double-digit year-on-year stock declines, reflecting genuine demand in the provinces. 

What buyers and sellers can expect 

The consensus among bank economists heading into 2026 was for modest house price growth in the 4–5% range. Westpac forecast 5.4%; ANZ initially 5%; Cotality 5%; BNZ 4%. More recently, ANZ revised its forecast down to 2%, citing the possibility that as the economic cycle matures, mortgage rates could shift from tailwind to headwind if the OCR track turns upward. The Iran conflict adds further downside risk to those projections. 

2026 was always a ‘consolidation’ year, not a ‘boom’ year. The Iran conflict hasn’t changed that picture fundamentally, though it has introduced a wildcard. If the conflict is brief and the Strait of Hormuz disruption resolves quickly, expect the market to continue its measured upward drift. If it persists, higher inflation and squeezed household budgets will be a real headwind to the recovery the market has been banking on. 

Buyers: The message from economists is consistent: it’s a buyer’s market. Listings are at high levels, sellers are realistic (not desperate), and the days of missing out on a property and having nothing comparable available are largely gone. “Time and choice are on your side,” as Squirrel’s John Bolton puts it. The window to buy well-priced properties before the recovery fully beds in won’t last indefinitely. 

Sellers: Pricing correctly is now more important than timing the market. In Auckland and Wellington especially, the elevated stock of listings means overpriced properties simply sit while well-priced ones move. Davidson’s advice holds: “Sell first, ideally with a long settlement date, then turn your attention to finding a new property.” A long settlement protects you in a market where buyer urgency remains subdued. 

Investors: The picture has genuinely improved. Full interest deductibility is back, the bright-line test has been wound back to two years, and the investor mortgage application surge of 2025 signals that the money is moving. The focus should be on yield and liveability rather than short-term capital gain. As Davidson noted at year-end, house prices are likely to rise ‘perhaps 5%’ in 2026 – respectable, but not transformative. Investors who buy well-designed, well-located properties and hold for the long term will outperform those chasing growth. 

New Zealand’s property market was on the cusp of a measured, sustainable recovery and, by most indicators, it still is. 

What the Iran conflict has introduced is uncertainty about timing. The RBNZ will look through a short-lived energy shock; it will not look through one that embeds higher inflation expectations. Watch the 8 April OCR decision closely – how the Reserve Bank frames the Iran situation will tell you a great deal about the trajectory of mortgage rates for the rest of the year. 

Want to talk through what this means for your portfolio? Call us on 0800 GOODWINS.