NZ property market update: Townhouse prices take a beating

Two townhouses on St Andrews Road in Epsom sold earlier this year for $600,000 and $340,000 less than their 2022 purchase prices, respectively. Ouch.

The Epsom sales were not unusual. According to Cotality, 18% of all townhouses sold in Q1 2026 changed hands below their purchase price. It was the same quarter that saw 41% of apartment resales record a loss. Nationally, one in eight properties sold in Q1 went for less than the owner paid.

However, roughly nine-in-ten sellers still made a gross profit, which means New Zealand property remains, by historical standards, a functional wealth-building asset. But the distribution of that pain tells a story about who bought what, and when, and it has direct implications for anyone holding, or considering buying, investment-grade stock right now.

North vs South

The OneRoof–Valocity House Value Index for the three months to April 2026 shows a national average property value of $967,000 – up 0.4% ($4,000) over the quarter.

National average property values, however, are $3,000 below where they were a year ago, $10,000 below two years ago, and only $21,000 above their five-year-ago level. Let’s call it stagnation.

Five regions recorded falls over the quarter: Manawatu–Whanganui dropped 1% to a $601,000 average; Bay of Plenty and Hawke’s Bay each fell 0.3%; Auckland and Taranaki both edged down 0.1%.

Auckland’s position is the most sobering for investors. The average Auckland property value of $1.263m is now 20% ($316,000) below its market peak (before inflation is even factored in).

The South Island is a different economy: West Coast values rose 3% over the quarter to $513,000, Southland lifted 2.8% to $589,000, Canterbury gained 1.4% to $819,000 and Otago added 1.2%, with average values now sitting above $1 million. Canterbury’s House Price Index is up 3.9% year-on-year.

Christchurch and Dunedin both grew 1.6% in the quarter, with Christchurch hitting a new average value high. Queenstown–Lakes edged up 0.7%, buoyed by the easing of the foreign buyer ban in March. Average values there now sit at $2.13m, around 40% above their five-year-ago level.

Wellington City, by contrast, has an average property value 19% below its five-year-ago level and only 2% above its pre-Covid baseline. Owners who bought at the 2021–22 peak are sitting on average paper losses of $405,000.

Nine suburbs below pre-Covid levels

OneRoof’s suburb-level analysis of 933 suburbs across the country identified 106 that have recorded falls across every time horizon measured: three months, six months, one year, two years, and five years.

Nine have fallen below their pre-Covid February 2020 levels. In Auckland, Point England and Te Atatū Peninsula are the headline cases, down roughly $70,000 from six years ago, driven by the same townhouse supply glut that is hammering Epsom. In Wellington, Te Aro, Aro Valley, and Mount Cook have shed around $60,000 against pre-Covid values.

Meanwhile, 26 suburbs have hit new value peaks and show signs of weathering any further market softness. The strongest performers include Otematata in Waitaki (up 6% over the quarter), Te Anau in Southland (up 5%), and Christchurch’s Mairehau (up 4.1%). These are smaller, more affordable communities with limited supply and genuine owner-occupier demand. At the top end, Omaha, Arrowtown, and Lake Hayes continue to attract wealthy buyers competing for a tight supply of trophy homes.

The townhouse problem

The raw loss statistics from Cotality are striking: 18% of townhouse resales in Q1 2026 went for less than their purchase price, with a median loss of $49,500, before accounting for real estate commissions and marketing costs (which add another $25,000–$35,000).

Across Auckland specifically, 19.9% of all residential property sales in Q1 resulted in a loss. Hamilton sat at 13.1%, Wellington was 16.7%, and Christchurch, by contrast, recorded fewer than 5% of sales at a loss, highlighting the structural demand underpinning Canterbury’s market.

The investor segment is under particular pressure, with Cotality’s data showing 13.7% of investor resales in Q1 were at a loss, up from 11.3% in Q4 2025.

Driving that figure are two-bedroom townhouses without car parking, purchased during the 2020–22 boom in bulk by investors responding to MDRS zoning incentives.

Kelvin Davidson, Cotality’s chief property economist, stresses that this is not a fire sale and that distressed selling is not dominating volume. Activity appears to reflect sellers who need to exit and accept that the market price reflects the current supply surplus. Others are holding tight, with an estimated 21,850 listings pulled (rather than sold) in 2025, the highest figure since 2018.

That wait-and-see posture has limits, however, particularly as banks are now lifting mortgage rates and inflation persists. Infometrics is forecasting three OCR increases this year and, if that materialises, the pressure on leveraged investors holding underperforming stock intensifies.

What this means for investors

The market in 2026 isn’t uniformly difficult when you consider that Canterbury investors are experiencing something close to conditions that existed nationally in 2018–19 – rising values, tight supply, and growing rental yields as population flows from more expensive centres. Similarly, Queenstown–Lakes remains a scarcity market with a high-quality buyer pool, and Southland offers genuine yield in a market that has barely drawn down from its peak.

The pain is largely concentrated in smaller townhouses in Auckland and Wellington, particularly those bought off the plan between 2020 and 2022, in areas where the MDRS rezoning introduced supply that has not been absorbed by owner-occupier demand.

If you hold this stock and are considering your options, the data argues that waiting for a price recovery in the short term is hopeful, at best. The pipeline of new townhouse consents grew 14% year-on-year to January 2026, which means more competing product is still arriving.

For buyers, the buyer’s market conditions Cotality describes (lots of choice, flat prices, and sellers under pressure) are a structural advantage that will not last indefinitely. The South Island’s momentum suggests the window for buying at bottom-of-cycle prices in Christchurch and Dunedin may already be closing.

Whether you’re assessing existing holdings or looking for where the real opportunities sit in the current market, our team can help you work through the numbers.

Call 0800 GOODWINS to talk with a property specialist.