New Zealand's property market is approaching 2025 with a mix of challenges and opportunities, as lower mortgage rates contend with stretched affordability, abundant listings, and a softening labour market.

CoreLogic NZ's December Housing Chart Pack shows that while mortgage rate reductions will provide relief for many buyers, expectations of significant growth remain tempered by ongoing affordability constraints and broader economic conditions.

CoreLogic NZ Chief Property Economist Kelvin Davidson forewarns debt-to-income (DTI) ratio caps – which limit the amount that can be borrowed relative to income -  could also impact some borrowers in the first half of 2025.

"Lower mortgage rates will support sales activity and help stabilise property values, but affordability constraints, elevated listings, and a soft labour market will remain key challenges," Mr Davidson said.

"DTI restrictions may also start to influence buyer behaviour, adding further complexity to the market outlook next year."

Taking these headwinds and opportunities into account, Mr Davidson expects property sales volumes to rise by approximately 10 to 15% in 2025, with national values increasing around 5%, marking a muted recovery by historical standards.

November market performance

Property sales activity rose by 9% in November compared to the same month last year, marking the 18th rise in the past 19 months. However, despite the rise, volumes remain approximately 10% below seasonal norms, reflecting cautious buyer sentiment.

Total listings available for sale increased to 30,150 in November, following the seasonal winter slowdown.

"The volume of listings on the market is providing buyers with time to negotiate and secure deals on their terms, but sales remain constrained by affordability and confidence factors," Mr Davidson said.

Reflecting the buyer's market, the CoreLogic Home Value Index (HVI) declined a further 0.4% in November, the ninth consecutive monthly fall. Since February's 'mini peak', national property values have dropped around 5%.

Regional performance remains varied, with Wellington, Auckland, and Hamilton underperforming, Tauranga showing stability, and Christchurch and Dunedin recording slight gains.

Mr Davidson said first home buyers (FHBs) have maintained a strong presence, accounting for 25.5% of property purchases in November as they enjoyed lower house prices, less competition and leveraged financial tools such as KiwiSaver.

Mortgaged multiple property owners (MPOs), including investors, increased their market share to 23% while relocating owner-occupiers ('movers') remain quieter but could gain momentum as conditions improve.

Regional perspective

The regional property market continues to reflect diverse trends Mr Davidson said. Total listings in the year to November have risen significantly in key regions, with Wellington, Bay of Plenty, and Auckland seeing increases of more than 10% compared to last year.

Elevated stock levels have heavily impacted Wellington where property values are down 24.6% from their peak, while Christchurch has recorded more modest falls of 6.5% for the same period.

"Regional markets are displaying a mixed performance, with some areas stabilising while others face ongoing price corrections," Mr Davidson said.

"The abundance of listings will give buyers significant choice into the new year, but sellers may need to be realistic in their price expectations if they want to secure a sale in a timely manner."

Demand eases on rental market

Rental growth has settled increasing only 1.0% in the year to November on the Stats NZ flow/new tenancy measure, comfortably below the long-term average of 3.2%.

Rents in Auckland remain flat at $650/week but have increased 14% in Dunedin in the past year to $530/week, where gross yields are the highest in the country at 4.5%.

"Rents are already high in relation to household incomes, so a slowdown was always likely at some stage," Mr Davidson said.

"But subdued rental demand owing to a slowdown in net migration and more available listings on the market are also adding to the slowdown too."

Even with the slowing rental conditions, gross rental yields are at their highest level since early 2016,  reaching 3.9% in November, from a floor of 2.8% in late 2021.

It's unlikely to be a high enough return for some investors, who will be eagerly anticipating a fall in rates to reduce their gap between rent and mortgage repayments.

"Even though rental yields have trended higher, they're still relatively low compared to mortgage rates, so some would-be property investors might still be watching and waiting for interest rates to fall even further – which would reduce the required top-ups from other income," Mr Davidson said.

December Chart Pack highlights:

New Zealand's residential real estate market is worth a combined $1.62 trillion.

The CoreLogic Home Value Index fell 0.4% in November, the ninth consecutive monthly decline, bringing the total fall since February's mini peak to around 5%.

Total listings on the market surpassed 30,000 in November to be 25% up on the five-year average.

Property sales activity increased 9% year-on-year in November, but remains 10% below typical seasonal levels.

First home buyers represented 25.5% of purchases, while MPOs accounted for more than 23%.

Rental market conditions remained flat amid slowing net migration.

Inflation returned to the 1–3% target band, with the next OCR cut forecast for February.

Download and subscribe to the monthly CoreLogic Housing Chart Pack at corelogic.co.nz/news-research/reports/housing-chart-pack.

ENDS

Source: CoreLogic Media