New Zealand Real Estate Market Trends, Property Auctions, and Mortgage Rates in 2025

Observing Recovery in the Market

The property market in New Zealand is described as being in a phase of recovery in 2025, yet it continues to face several challenges:

• Sales and Values: Recent analysis from CoreLogic indicates a projected 10–15% increase in total property transactions, together with an estimated 5% rise in home values. Despite these improvements, market activity is still measured against long-term averages, reflecting the influence of buyer caution and ongoing economic uncertainty.
• Listings Abundance: The current volume of homes for sale is at a decade-high, offering greater choices for buyers and increased negotiating potential. Sellers may need to adjust their price expectations to achieve successful sales.
• Regional Variation: Notable differences persist across various regions. For example, Wellington has experienced significant declines from previous peak values, while areas such as Christchurch and Tauranga have shown more stable or modest gains. These patterns highlight the importance of conducting localised market research.

Housing Affordability Landscape

Despite the downward trend in mortgage rates, homeownership continues to present affordability challenges for many:

• Affordability Squeeze: Property values remain elevated relative to incomes, and wage growth has not kept pace, which continues to limit market entry, particularly for first-home buyers.
• First-Home Buyers (FHBs): Data from late 2024 indicates FHBs accounted for about 25.5% of property purchases. Many have benefited from reduced house prices, lower competition, and assistance from schemes like KiwiSaver, though their borrowing capacity may still be limited by newly implemented lending restrictions.

Navigating the 2025 Mortgage Rate Setting

In 2025, the most notable change for prospective buyers and homeowners is the reduction in mortgage interest rates:

• Forecast Rates: Projections from major banks and economists indicate that mortgage rates will be in the low-5% range, with some short-term fixed loans potentially reaching the high-4% range by late 2025. These figures reflect a decrease from the higher rates observed in previous years.
• Effect on Borrowers: The lowering of interest rates may reduce repayment burdens for both new buyers and those seeking to refinance, improving the accessibility of homeownership within current lending parameters.
• Lending Restrictions: From July 2024, debt-to-income (DTI) restrictions cap most loans at 6× income for owner-occupiers and 7× for investors, with certain exceptions for new builds. These rules, designed to help maintain price stability as rates fall, also set clear limits on the maximum loan size for buyers.

Understanding Property Auctions in 2025

Auctions remain an important part of New Zealand’s property sales process, particularly for properties perceived as desirable. Here are some practical observations for buyers and sellers:

Auction Environment

• Competition and Pricing: Some properties, particularly family homes in popular school zones, may attract competitive bidding. Auction sale prices can at times exceed initial estimates, which is important for buyers to consider when preparing.
• Transparency Considerations: Certain buyers have expressed concerns about the lack of clearly declared pricing in auctions and deadline sales. Some individuals prefer to consider properties with set asking prices or those that facilitate negotiation to avoid competitive bidding scenarios.
• Buyer Preparation: Those interested in auctions are advised to:
  • Research comparable sales ahead of bidding.
  • Set firm spending limits aligned with their approved financing.
  • Be prepared for possible price increases during the bidding process.
  • Explore alternative methods of property purchase, if preferred.

Vendor Considerations

• Price Expectations: With a high number of listings, sellers may find it necessary to adjust their expectations, especially unless the property offers unique features or location benefits. Overpricing may result in longer listing periods or withdrawal from sale.
• Auction Outcomes: While auctions can result in prompt, unconditional sales, not all auctioned properties are sold immediately; some may be passed in and require further negotiation after the auction.

Rental Yields and the Investor Perspective

• Rental Market: National gross rental yields have increased (currently averaging 3.9%, noted as the highest since 2016), with this trend influenced more by modest property price decreases than by significant rental growth.
• Investor Sentiment: Even with improved yields, available data suggests that many investment properties generate returns lower than the cost of mortgage borrowing. Some investors may adopt a cautious approach, waiting for additional changes in interest rates before making new purchases.

Regulatory and Economic Influences on the Market

Several new policies and economic trends are expected to play important roles in 2025:

• DTI Caps: With the introduction of DTI caps, an individual’s borrowing potential is determined more directly by income rather than solely by property value or deposit amount. This measure aims to help control price escalation and reduce market volatility.
• Loan-to-Value (LVR) Easing: Some easing of LVR requirements on deposits has taken place, though its impact is considered less significant compared to DTI caps.
• Economic Uncertainties: Broader issues—such as global economic fluctuations, inflation, and a potential increase in unemployment rates to around 5%—are also likely to influence buyer confidence and lending conditions during 2025.

• Opportunities for Buyers: With a greater number of listings, decreased borrowing costs, and more flexibility in negotiations, 2025 may present advantageous conditions for those considering property purchases, provided they meet current lending requirements.
• Guidance for Sellers: Achieving higher sale prices may prove difficult unless selling a unique or highly sought-after property. Flexibility regarding pricing and expectations may assist sellers in achieving more timely sales.
• Strategic Considerations: Buyers are encouraged to act when finding suitable properties, especially as competition may increase if rates decline further. Sellers may benefit from realistic expectations and focused marketing strategies.

Sources

• CoreLogic NZ: Conflicting forces to shape New Zealand’s property market in 2025
• Interest.co.nz: Buyers spoiled for choice as the housing market gears up for its busiest time of the year
• OneRoof: Mortgage forecast—Just how low will interest rates go in 2025?

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