Photo: RNZ / REECE BAKER
2025 was not a great year for many house price forecasters, who had to revise their forecasts down many times as the year went on.
At the start of the year, Westpac thought prices might lift 7 percent. At one point ASB thought they could lift 10 percent.
But while activity picked up over the past 12 months, prices were mostly flat and even went through months of decline in the middle of the year.
So what might lie ahead in the coming 12 months?
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Commentators say there is likely to be a bit of an increase in prices in the year ahead, but this time no one expects increases anywhere near double-digit percentages.
BNZ chief economist Mike Jones said house prices might rise 4 percent over 2026, about the same as the Reserve Bank's forecast.
"We've had three years in which house prices basically went sideways - we think the trend will bend upwards."
But he said that increase would be below the average increase of earlier years and there was a chance that the lift could be smaller than 4 percent.
Turnover was back to healthy levels, he said.
"When we when we stack up the demand factors for next year, they're all pretty positive - you've got the economy defrosting, which tends to coincide with a bit more housing market activity, you've got population growth which will probably pick up a bit… And mortgage rates may not go a lot lower, but they're going to stay relatively low and at levels that will support a bit more housing investment.
"So I think when you line up those demand factors, we will see activity continuing to recover. It's just on the house price front, the big uncertainty, the big question is what happens to supply and that's been the real story of the last couple of years.
"Even though you've got lower mortgage rates and more demand, you've had more transactions coming through, that's been more than offset by listings and growth in supply. We may be in the same position next year where we've just continued to see supply match up pretty well with demand and there hasn't been much of a change in house prices."
Kelvin Davidson, chief economist at property data firm Cotality, said 4 percent or 5 percent seemed a likely increase.
"Some of the things that have been restraining house prices - affordability, lots of listings, slowish pass through of lower mortgage rates, a weak economy, weak labour market - some of those things seem to be turning around now. Affordability is back to normal, interest rates are passing through a lot more, the economy is starting to turn around and listings have come down a bit. The conditions are definitely in place for growth in property values next year."
But he said things like debt-to-income ratios would limit growth and there was still a strong supply of houses being built.
Wellington and Auckland were lagging other markets and could have more room to grow, he said. "I'm not saying they necessarily will but at some point in those markets you think they could snap back a little faster. But generally I think we'll probably still have a wee bit of a two-speed economy... parts of Canterbury, Southland, Taranaki - rural areas might rise a bit more strongly as they have been doing this year."
But Gareth Kiernan, chief forecaster at Infometrics and one of the few who initially expected the housing market to be weak in 2025, said he was not confident there would be much growth at all.
"We still have house prices going sideways or potentially drifting slightly down through the next year. That's essentially based around our affordability argument that while interest rates are lower it doesn't necessarily mean that people want to take on more debt or pay more for housing. House price-to-income ratios are still worse than any time prior to 2020."
But he said if there was a strong economic recovery it could put pressure on house prices and he was not as confident in his forecast as he had been in previous years.
Rental market
Jones said what happened with the rental market would depend on population growth.
Rents have slowed significantly around the country.
"Population growth is quite weak, it's about half the long-run average and so there's been that excess of supply particularly when we've seen departures from New Zealand at relatively high levels. I think the picture will change as we go through next year. We'll see the rental markets stabilise."
Kiernan agreed the rental market was likely to be flat too. "We've got weak net migration, weak population growth, we've been seeing the impacts of that to some degree on the softness in the rental market through this year as well."
Davidson said even though rents had been edging lower they were still high in relation to incomes. "That's a natural handbrake. There's still a decent amount of property out there. The rebalancing to a degree of the overall housing stock is keeping a lid on prices but it'll also keep a lid on rents…. but rents don't tend to fall for too long.
"So it could be that there's a wee bit of growth next year. But generally, I think rental markets still stay pretty subdued, sort of vaguely in favour of tenants and a bit tougher for landlords."
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