Homeowners in New Zealand may face several more years before nominal house prices return to their late 2021 peak, according to a recent analysis from the country’s ASB Bank. The bank’s New Zealand House Price Outlook suggests that prices are unlikely to reach those highs again until around late 2029.

The report projects that national house prices will remain relatively stable throughout 2026, followed by a modest increase of approximately 3.5 percent in 2027. ASB senior economist Mark Smith noted that this outlook offers some relief for first-home buyers and those looking to upgrade, but also signals a shift toward a more balanced housing market. He emphasized that while prices are expected to rise, the growth will be more measured and driven by income gains rather than rapid capital appreciation.

Since peaking in 2021, the market has undergone a significant adjustment. National house prices are currently about 15 percent lower in nominal terms and nearly 30 percent down when adjusted for inflation. This correction has improved affordability, yet demand has yet to fully rebound, resulting in greater choice for buyers and tempered expectations for sellers compared to the previous upswing.

Over the three decades leading up to 2020, housing prices in New Zealand had increased nearly sixfold, averaging growth around 6 percent annually—outpacing nominal gross domestic product (GDP) growth at roughly 5 percent per year. However, that long-term trend was disrupted by sharp nationwide declines throughout 2022 and early 2023. The report attributes this downturn to several factors including cyclical market weakness, low net immigration, rising borrowing costs, elevated uncertainty, and a high volume of existing home listings.

The analysis describes the Covid-19 era housing cycle as unusual by historical standards, with real gains from 2020 and 2021 largely wiped out. This volatility was particularly challenging for about 30,000 first-home buyers who entered the market during 2021.

Looking ahead, the report highlights a changing relationship between the housing market and the broader economy. Future housing price movements and household spending are expected to be more closely linked to income growth rather than rapid increases in property wealth. Smith suggested that an income-led market upswing could mitigate risks of economic overheating and support a more balanced expansion. Such a scenario might allow for a more gradual approach to monetary policy tightening by New Zealand’s Reserve Bank.

Nonetheless, uncertainty remains. Should the housing market perform stronger than current expectations, the Reserve Bank’s Official Cash Rate could exceed the current forecast peak of 3.25 percent in 2027, potentially prompting more aggressive policy measures.