ASB says house prices will not get back to their 2021 peak until late 2029

New Zealand house prices are unlikely to climb back to their 2021 highs until late 2029, and buyers should not expect the fast capital gains of the past three decades to return, according to a new house price outlook from ASB economists.

The bank’s Economic Note on the house price outlook, released this week, forecasts no change in national house prices this year, a rise of around 3.5 percent in 2027, and gains after that broadly in line with nominal income growth of about 5 percent a year. “It may not be until late 2029 that nationwide house prices approach late 2021 peaks on a nominal basis,” the report concludes. ASB is the country’s second biggest housing lender, with $84 billion of loans on its books at 30 June.

ASB senior economist Mark Smith told RNZ the recovery would come, but slowly. “House prices will still rise, but we expect the recovery to be more measured, more income-led and ultimately more sustainable.”

The starting point is a long way down. “NZ house prices are currently about 15% below historic peaks, or just under 30% down in inflation adjusted terms, albeit with acute regional differences,” the report says. That is a sharp break from the 30 years to 2020, when prices rose almost sixfold by ASB’s count, an average of about 6 percent a year and faster than the economy grew over the same period.

Smith put much of the damage down to the pandemic years. “Then in the Covid-era period, we had policy stimulus really thrown out there to try and support the economy. The most interest rate-sensitive part of the economy is typically housing and that took off. We’re still living with that hangover now.”

ASB points to three longer-term shifts that it expects to hold prices back. The first is interest rates. For decades mortgage rates trended lower, which let borrowers stretch further for a house. “The decline in mortgage interest rates that had occurred from the early 90s up to 2020, that looks to have run its course,” Smith said. The second is population. “Now we’re on the other side, we’re past the sweet spot demographically. So we’re looking at slower population growth going forward, and also a less work-rich share of the population as well.” The third is supply. Smith said there had been “a real increase in housing supply, particularly for those non-standalone dwellings”, such as townhouses, retirement units and apartments, which gives buyers far more choice in the places they want to live.

The regional differences ASB mentions show up clearly in affordability figures from the Ministry of Housing and Urban Development. Its Local Housing Statistics measure how many years of median household income it takes to buy a median-priced home, using REINZ sale prices and Stats NZ income data. A Newswire analysis of the 18 cities in that dataset shows the national figure peaked at 10.4 years in the June 2022 quarter and had fallen to 7.95 years by the December 2025 quarter, the latest available. That is a little better than the 8.1 years it took at the end of 2019, before the pandemic boom began.

Auckland has come down the furthest. A median Auckland home cost 11.95 years of household income at its peak and 8.48 years at the end of 2025, which is better than the 9.57 years it cost in late 2019. Wellington City fell from 9.56 years to 6.44 years. Christchurch moved much less, from 8.88 years to 7.72 years, and it still takes about a year more income to buy there than it did before Covid. That lines up with Smith’s comment to RNZ that Auckland and Wellington are further from their peak than the national average, while Canterbury has already recovered much of its fall. Queenstown remains the least affordable of the 18 cities at 10.89 years, and Invercargill the most affordable at 5.8 years.

The latest sales figures point the same way. REINZ’s July report, the most recent available, put the national median price at $760,000, down 0.7 percent on a year earlier, with homes taking a median 50 days to sell. Auckland’s median fell 3.6 percent to $940,000 and Wellington’s fell 4.0 percent to $725,000, while Otago’s house price index reached an all-time high. “What has changed is the pace,” REINZ chief executive Lizzy Ryley said. She also noted that “Where employment is holding up, the property market is generally holding up, too.”

Interest rates remain the wild card. The Reserve Bank lifted the official cash rate to 2.75 percent on 2 September, its second increase in a row, and its next decision is due on 28 October. You can follow every move on our OCR tracker. ASB currently expects the OCR to peak at 3.25 percent in 2027, and Smith said a slower, income-led housing recovery “should reduce the risk of economic overheating and support a more balanced expansion which could in turn see a more gradual monetary policy tightening by the RBNZ”. He added a warning. “If the housing market surprises on the upside, the OCR could need to move above our current 3.25 percent peak view in 2027.”

For the market as a whole, a late 2029 recovery would mean roughly eight years to get back to the prices paid at the top, and Smith said it would take much longer again once inflation is taken into account. He told RNZ that buyers now had more time and choice than they did when prices were rising, and that sellers needed to keep their expectations realistic. The report also notes that the price falls since 2021 have made housing significantly more affordable, yet the market has still not taken off.

ASB is careful not to overstate its own certainty. The report describes the outlook as “incredibly uncertain”, and Smith acknowledged that the last few years have caught forecasters out. “At present, it is hard to identify factors that will drive a strong house price pick-up, but the art of forecasting post-Covid has been a humbling experience.” Even so, the bank expects the combined effect of flatter interest rates, slower population growth and more housing choice to “contribute to a more moderate house price recovery in the coming years, with outsized capital gains looking to be harder to achieve than in the past.”

Do you think ASB is right that the days of big capital gains are over, or will house prices surprise everyone again? Tell us in the comments below.

This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂