NZ housing market analyst Kelvin Davidson discusses sales volumes, first-home buyers, rents, and the election-year outlook
A daily news podcast from the New Zealand Herald examining current conditions in New Zealand's housing market.
Summary
Host Chelsea Daniels speaks with CoreLogic NZ Chief Property Economist Kelvin Davidson about the state of New Zealand's housing market in early 2026. Davidson describes a market that is broadly "stuck in neutral" — sales volumes have returned to near-average levels after multi-year lows, but growth rates have turned negative and the start of 2026 has been sluggish. He notes that the Iran conflict has introduced new uncertainty, likely pushing mortgage rates higher and weakening the economy simultaneously, which could extend the soft patch further. First-home buyers remain a bright spot, making up more than a quarter of market activity, aided by lower prices, falling interest rates, KiwiSaver access, and low-deposit lending. The upcoming New Zealand election adds another layer of uncertainty, particularly for investors watching for potential capital gains tax and interest deductibility changes.
Key Takeaways
FULL TRANSCRIPT
Introduction
Chelsea Daniels: I'm Chelsea Daniels and this is The Front Page, a daily podcast presented by the New Zealand Herald. Sales volumes have continued to decline across New Zealand's housing market. It marks a third consecutive monthly fall and extends the subdued start to 2026, even as property values remain broadly stable. But beneath the surface, the picture is uneven. Auckland remains soft, first-home buyers are propping up demand, and the rental market is showing signs of strain. At the same time, global uncertainty and inflation risks are starting to cloud the outlook. Today on The Front Page, CoreLogic NZ Chief Property Economist Kelvin Davidson is with us to unpack what's really happening in the housing market and what could happen next.
Sales Volumes: Back to Average but Growth Has Stalled
First off, Kelvin, tell me about sales volumes. Where are they at around the country at the moment?
Kelvin Davidson: The level of sales is actually fairly normal. It's been a tough couple of years — or it was, at least in sort of 2022, 2023. The level of sales got down to a very low mark, a sort of 40-year low. There has been fairly consistent growth since then, to the point where the level of sales — the number of deals — is kind of back to around about average levels. But growth rates have cooled off. And so to start this year, it's actually been a pretty soft start. We've actually seen annual growth rates turn negative, so in other words, sales have been falling compared to the same month last year. The number of deals is kind of normal, but their growth rate has really slowed down and it's been a sluggish start to the year.
I think maybe January's number you could explain — perhaps there were a few deals pulled forward into December because the banks were offering big cashbacks in December, so maybe there were some deals kind of pulled through if they could be, to take advantage of that. But I don't think that really holds for February and March. I think it's just genuinely been a pretty soft start to the year, with buyers and sellers still pretty cautious. Of course, all this predates the Iran conflict too. So we're probably going to see more soft results for sales into April, May, June, depending on how long it lasts, which is the big question.
It just highlights that there are still cautious attitudes out there. If people don't need to shift house, they're not. If people don't need to purchase a house, they know they're in the ascendancy — there are lots of listings, they're the buyer, they have the power. So they're not necessarily rushing. At the same time, vendors aren't really under any forced selling pressure either. We're not seeing mass job losses or anything like that. So it's kind of pretty balanced at the moment. It's ticking along, but it just highlights that the attitudes are still pretty cautious.
Chelsea Daniels: Do you reckon it signifies that the market's quite resilient, or do you reckon it's just stuck in neutral at the moment?
Kelvin Davidson: Probably stuck in neutral, I think, is a pretty good way of putting it. There's a degree of resilience in some parts of the country. If you're looking at, say, provincial South Canterbury and Otago, some markets there are actually still ticking along. Invercargill has seen house price growth running at sort of seven or eight percent annually lately, whereas markets like Dunedin and Wellington are still down, still looking pretty weak. So there are regional stories — you could probably spin the line of resilience for some of those markets — but I think the better analogy is probably just stuck in neutral. It's been tracking sideways, and really this has been the case for the housing market for really the last sort of four years.
In some ways, we saw the big downturn in prices and sales through 2022, 2023. Through 2024, 2025, it's just been really tracking sideways. And there were expectations earlier this year — from ourselves included — that perhaps we'd see a bit more sales growth this year and potentially see house prices start to pick up a little bit. That was looking vaguely on track. Now, of course, we've had the Iran conflict come along and that's probably been pushed back a bit. So yeah, trending sideways, tracking sideways, stuck in neutral — whichever analogy — it is just a continuation of the soft patch we've seen for a few years now.
Auckland vs. the Regions: Why the Gap Persists
Chelsea Daniels: If we zoom out and have a look at the whole country, why is somewhere like Auckland still lagging while the likes of Christchurch, say, is kind of seeing growth?
Kelvin Davidson: Auckland's obviously our biggest market — 35%, 40% of houses, of population, of our economy. So it's a really key centre. Now, it has actually seen housing affordability improve a lot. It might seem slightly strange to be saying that for people who live outside Auckland, or even inside Auckland — they still look at million-dollar houses and think, how do I stretch that far? But if you look at affordability in a relative sense, say house price-to-income ratio or mortgage payments as a share of incomes, it has improved a long way from where it was three or four years ago. That's just a feature of falling house prices, rising incomes, and falling interest rates over that period. So affordability is looking better — I'm not saying it's cheap or that it's easy, but affordability is better.
So you would think that might be leading to a bit more growth in Auckland. But there are a couple of other factors. Economic confidence is still lacking in Auckland — the services sector is a big part of the economy there, and that's a segment we know is lacking a bit. As well as that, there's still a lot of supply in Auckland, still a lot of new townhouses being built. So the physical stock of property has risen, and that will tend to restrain house prices too.
If you look around the so-called provincial parts of the country — Invercargill, rural parts of Canterbury and Otago, parts of the Waikato region — these areas are relatively resilient. Just look at the shape of the economy: agriculture is doing well, farming is doing well. So those markets aren't booming necessarily, but there's going to be a bit more cash sloshing around. Maybe farmers are now looking at a rental property. There is just that stronger economic confidence, a bit more cash flow, and so they'll be propping up house prices. It fits with the shape of the economy really.
Wellington is another key centre that's pretty soft. That has had extra supply to some extent, but I think it does highlight the shape-of-the-economy factor — we know the public sector has been in restraint mode, and that has had an impact on Wellington.
First-Home Buyers: The Market's Standout Performers
Chelsea Daniels: I see that first-home buyers are making up more than a quarter of the market. What's keeping them so active at the moment despite that broader uncertainty?
Kelvin Davidson: First-home buyers have always got that incentive to get into the market. It's still that Kiwi mindset of trying to buy that first property, and in many cases actually servicing a mortgage week to week will be cheaper than paying rent. Now there are other costs of course of owning a home — it's not as simple as that — but I think that's quite a strong motivation for people and that's never really disappeared.
But just at the moment, you've obviously got lower house prices — that's a big factor for any home buyer. Prices are down a long way from where they used to be in most parts of the country. Interest rates are down too — they were above seven percent a few years ago, and now you'd generally probably still get a rate below five percent. As well as access to KiwiSaver for at least part of that deposit — those KiwiSaver pots get bigger and bigger over time. And first-time buyers are really tapping into the low-deposit lending allowances of the banks. There's that 20% or 25% speed limit now for banks to lend at reduced deposit — in this case, less than 20% equity. So a lot of first-time buyers are getting in without 20% equity. In the latest Reserve Bank stats over January and February, perhaps five in every ten, six in every ten first-time buyers are getting in without 20% equity. So that's a big thing — they don't need to wait as long, don't need to save as hard. You can get into the market with that reduced equity.
First-time buyers have been a strong success story for a long time now and it's just ongoing. It's great news really.
Chelsea Daniels: I was going to ask you about that less-than-20% deposit situation. Are we seeing any risks building? Is that going to become an issue in 10 or 15 years' time?
Kelvin Davidson: Obviously the less equity or deposit you put in, you are slightly more vulnerable to falling house prices and the risk that you owe more than what you own — effectively your mortgage is bigger than the value of your property. But given where we are in the cycle, we're probably more or less at the bottom for house prices. It's difficult to see them necessarily falling too much further. There's maybe some slight downside risk from the Iran conflict and potentially higher mortgage rates. But we've had the big falls over the past couple of years, so the risks of negative equity have reduced a lot.
Also, negative equity can't be great for the mindset, and it does become a real problem if you have to sell. But that's the thing — if you don't have to sell, the bank's not going to come knocking. There's not necessarily any huge problem there as long as you're servicing the debt. And talking over a 10 or 15-year horizon, prices will probably rise over that horizon anyway. So the chances of negative equity have reduced.
There are some people still in negative equity from three or four years ago — perhaps they purchased at the peak and values have fallen since then. That can't be an ideal scenario, but the numbers aren't huge. We're not seeing big non-performing loan burdens on the banks' books or lots of mortgagee sales or anything like that. It can't be good for the mindset, not denying that. But I think the risks of a larger number of people putting in reduced deposits are probably not that great at the moment. It is a way in for first-time buyers and it's probably been pretty successful.
Chelsea Daniels: So it's not going to be like a 2008 situation all over again in 20 years' time?
Kelvin Davidson: No, I don't think so. And even if you get in with less than 20% deposit, it still doesn't mean zero deposit. People are still generally putting in — it might be 15%, it might be 10%. In some cases, under Kāinga Ora loans, you can get in with as little as 5%. But generally people will still be putting in 10% to 15%. Not only that, it's not a freebie — the bank is still checking that you can service the loan, that your income is good enough, your expenses are low enough, all of that. So it's only one of the checks they're doing as they go through that loan assessment. And generally people are servicing the debt. There are no real non-performing loan issues. So I think it's proven pretty successful at the moment.
The Rental Market: Modest Relief for Tenants
Chelsea Daniels: I see also that rents are falling slightly but still high relative to incomes, which comes probably as no surprise to literally anyone. What does that mean for renters in real time?
Kelvin Davidson: I'm reluctant to say that it's a tenant's market because rents are still very high in relation to incomes — it's still expensive to rent, there's no doubt about that. But on the flip side at the moment, rents are easing down slightly and there is quite a good amount of rental stock available for tenants to look at. So it probably is slightly more in favour of tenants than it has been for a little while. I'm not saying it's easy, but it's maybe a little bit easier than it has been.
If people are rolling over existing tenancies — coming to the end of their existing lease — they may well be able to just negotiate a bit, say, "Hey, could you drop our rent or else we can go elsewhere?" And for people looking around and moving rental properties, they may be seeing a little bit of rent savings. Again, not saying it's easy — rents are still pretty high — but the market is slightly tilted in favour of tenants.
Net migration has fallen a long way, so that extra demand growth for rental property has reduced from where it used to be. And we're still seeing a lot of new builds hitting the physical stock of the market, and a lot of those tend to be smaller dwellings — townhouses — which are pretty popular with investors and therefore they're putting them into the rental stock. So demand growth is a little bit lower, supply growth is still there, and I think there is a bit of balance in that market now. But yeah, it's still not easy. It's not easy to buy a house, it's not easy to rent a house. Housing costs are still very high, but things are a little bit more balanced than they have been.
The Iran Conflict and the 2026 Outlook
Chelsea Daniels: Kelvin, I know that the first few months of the year have started off a bit sluggish, and like you said, that hasn't actually taken into account the Iran conflict. What are you expecting? Have you had to completely crystal-ball gaze and completely change your outlook for 2026 at this point?
Kelvin Davidson: Things are obviously rapidly changing. Nobody knows how this is going to end or when it's going to end. So nobody can really talk with any certainty at all. I guess what we're left with is thinking about different scenarios, talking about what might happen in each of those scenarios, and maybe trying to attach a likelihood to each of them. But really, it's a bit of taking it as it comes at the moment.
I don't think it's too much of a stretch to suggest that we've already seen mortgage rates go up, and that all else equal will tend to restrain house sales and house prices. We're already seeing the economy weaken a little bit. You might think you get one or other of those things — higher interest rates or a weaker economy — but I think we're probably going to end up with both. So I don't think it's too hard to imagine that in that scenario the housing market is weaker, we see house sales stay pretty soft. We're heading into winter as well, so it could be a quiet few months coming up for activity in the housing market. And it's not too much of a stretch to imagine that house prices recede a little bit as well. I'm not saying they're going to collapse, because they're still a lot lower than where they used to be. But maybe just a chance they slide a little bit lower on the back of reduced certainty — maybe some job losses, a weaker economy, rising mortgage rates, that sort of thing.
After the downturn through 2022 and 2023, and a kind of flat patch since then, this extended soft patch for the housing market may well roll on. It's difficult to see upside at the moment. Certainly with mortgage rates increasing and the economy weakening, it does feel like we're probably in for another stuck-in-neutral scenario for the next little while. Depends on what happens in Iran, of course. But even if that situation does end pretty quickly, there are still going to be lingering effects — there's still been destruction of physical assets, of oil-producing assets. So the knock-on impacts through the economy aren't going to suddenly go away. It's hard to see in the near term much growth in the housing market, put it that way.
Investors: A Cautious Comeback Complicated by Election Uncertainty
Chelsea Daniels: What do you reckon will entice investors back into the market?
Kelvin Davidson: Investors are a really key focus this year. We've seen a comeback by mortgage multiple property owners — as we call them in our data — and that includes the clichéd mums and dads. That's where a little bit of that comeback has come from: the sort of smaller investor who might be buying their first rental property, using a bit of equity out of their existing house as a deposit on the first rental property. We have seen them come back. It's not a boom — it's been a measured comeback, probably back to around normal levels from a reduced level two or three years ago.
Lower house prices help there too. Lower interest rates help there massively — those cash flow top-ups that a lot of investors will put in have come down a long way. Tax rules have changed again — interest deductibility is back to 100%. So there are some supports out there for investors, and you can see why they'd be coming back.
But on the other hand, council rates are up, house insurance is up, and rents are very weak. So those are challenges for investors. There's also the election coming up. We know that Labour has already talked about a capital gains tax, so that's on investors' minds at the moment. Possibly you would imagine that the phasing out of interest deductibility becomes a political issue again — that's a challenge for investors too.
And there's more — at events I go to, there's just this creeping sense that people are starting to question the long-run assumption that house prices always go up at six to seven percent a year. That assumption does seem to be changing, just ever so slightly. People are starting to question: could capital gains in future be a little bit lower, and what does that mean for property investment? Does it mean that if I'm an investor, I have to accept a lower return because capital gains are lower? Or do I do it differently — try and get the same return by investing in different properties? Or maybe I look at other asset classes altogether. That's a very long-run thing, but that mindset does seem to be shifting ever so slightly too.
So there are lots of supports for investors at the moment, but there are some restraints. The election has been put in the background lately, but it is a real concern for property investors. I suspect some people who would have been investing are instead sitting on the sidelines, just waiting to see what happens — what might a capital gains tax look like, what are the tax rules going to be around interest deductions. Investors are a really interesting topic this year — one to watch.
Chelsea Daniels: I can imagine that as a property economist, you're looking at all sorts of things. But I bet election year gets really, really difficult to pinpoint and forecast what's going to happen, because you've got to be looking at each party's housing policies and economic policies all the time.
Kelvin Davidson: That's right. Every three years when the election comes around, there's always chat about what does the election do to the housing market. Running up to an election, you don't really tend to see much impact in prices — prices are just doing what they're doing. You do tend to see activity slow down. People do get a little bit uncertain around what will be September, October this year as we run up to that November election. People just put their plans on hold a little bit. So you do see sales volumes tail off compared to where they might otherwise have been.
But I think really the big thing is obviously waiting until after the election. We can speculate all we like in advance, and you do tend to see activity tail off a little bit, but really what matters is after the election — who wins, what policies they're going to have. You can have a little bit of a stab around what the parties are talking about in advance, but obviously you don't know until you've got the victor.
We know that if Labour gets in and leads a coalition government of the left, we're probably going to see a capital gains tax of some form on property. We're potentially going to see interest deductibility phased out again, potentially some other changes around property. Whereas if National leads a right-leaning coalition, maybe nothing changes at all. So it's going to be pretty interesting. But of course, that's only one part of the equation. There are bigger influences on the market — interest rates, what's going on in the economy, unemployment, those sorts of things. So it's always in the back of your mind, but you're also trying to keep a focus on what the really big drivers are.
Chelsea Daniels: Thanks for joining us, Kelvin.
Kelvin Davidson: No worries. Thank you.