Buyers cautious as headwinds offset lower interest rates

This has been a year of conflicting forces for the property market, with the positives and negatives largely cancelling each other out, Cotality Chief Property Economist Kelvin Davidson told Trade Me.

While lower mortgage rates would normally support sales volumes and property values, these tailwinds have been offset by high listings volumes, a soft economic and labour market backdrop, and restrictive debt-to-income rules. As a result, “conditions do indeed remain fairly muted,” Mr Davidson said.

Property values have stayed broadly flat at the national level. Major cities such as Auckland and Wellington remained subdued, while even more resilient markets like Christchurch and Hamilton had not yet shown signs of strong growth.

Despite challenges, Mr Davidson said there were encouraging signs. The oversupply of listings was beginning to ease as the number of properties on the market drifted lower, while sales volumes were edging back towards normal levels. Mr Davidson also noted that key buyer groups – including first home buyers and property investors – remained active.

Furthermore, lower interest rates were gradually filtering through. As existing borrowers rolled off higher rates and refinanced at lower ones, many households were starting to experience some relief from financial pressure.

However, Mr Davidson said hurdles remained. “The economy is battling to get into its stride and the unemployment rate may yet go a bit higher before it gradually starts to decline again,” he said. This uncertainty would probably make buyers more cautious and might restrict borrowing capacity.

With these forces offsetting each other, Mr Davidson said "it’s difficult to see a sharp rebound in house prices anytime soon." He forecast that the market would remain flat for the rest of 2025, which could set the stage for stronger growth in 2026.

For buyers with a long-term perspective, this calmer phase could offer opportunities – allowing them to enter the market during a buyer-friendly period and potentially benefit from capital growth in the years ahead.

With that in mind, if you know buyers who are weighing up their finance options – perhaps because they want to understand how changing conditions affect their borrowing power or repayments – I’d be grateful if you could refer them to me.