Borrowers facing big choices as housing market shifts

One of New Zealand's leading property economists has identified two key dynamics shaping the housing market right now – the critical decisions facing borrowers and the delicate balance between property sales and new listings.

Cotality Chief Property Economist Kelvin Davidson said the first issue was the tough choices people were facing regarding their home loans.

Part of the concern was that New Zealand appeared to be close – but not yet at – the bottom of the interest rate cycle, which was leaving some borrowers uncertain about how to structure their loans.

“This is a delicate choice for people,” he said. “They have to consider whether to lock in some debt for a two- or three-year period and get certainty, or to stay floating or short-term fixed, and try to re-fix again shortly at the absolute bottom of the cycle.” Mr Davidson said many were hedging their bets by doing a bit of both. “Ultimately, that’s a decision for each individual, and you only ever know the optimal strategy in hindsight.”

At the same time, some borrowers were weighing up the potential benefits of refinancing to a new lender. “Both June and July have set new records for the number of existing borrowers shifting to a new lender, with generous cash-backs on offer,” Mr Davidson said. “In many cases, given there’s a lot of debt on either floating or short-term fixed rates, people will be able to do this at low or no cost too, in terms of break fees.”

Sales outpacing listings

Mr Davidson said the second issue facing borrowers was the balance between sales and listings in the spring selling season, and the flow-on effect to prices.

“In recent months, sales have returned to ‘normal’ levels and have started to erode the number of listings sitting on the market,” he said. The key question, though, was whether this trend would continue. If sales kept outpacing new listings and supply failed to keep up with demand, “buyers may not have it all their own way in 2026”, Mr Davidson said, as negotiating power shifted to sellers.

Mr Davidson said 2026 was likely to see “more consistent property price growth re-emerge” due to improved affordability, more borrowers repricing onto lower rates, potentially lower unemployment and a tightening of stock levels – although debt-to-income rules would likely prevent another boom.

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