New Zealand’s housing market, which saw explosive growth during the Covid-19 pandemic, has now experienced one of the largest price declines in the world. This dramatic shift has significantly improved housing affordability for many New Zealanders. Following a period where median home prices were pushed to 11.2 times the median household income, the current downturn is reshaping the housing landscape in the country. While this may be a relief to potential buyers, the crash comes with its own set of challenges that continue to shape the market.
In June 2025, data from the Real Estate Institute of New Zealand (REINZ) revealed a 0.3% decline in the housing price index, continuing a trend that has persisted for months. Despite a reduction in mortgage rates, the market remains sluggish, with house sales turnover dropping 4.8%. This ongoing adjustment has led experts to describe the situation as a “once in a generation” housing crash, one that is having a profound effect on the nation’s property values and its affordability.
Housing Market Declines Across Major Cities
The downturn in New Zealand’s housing market is widespread, with price declines recorded across major cities. According to the data provided by REINZ, house prices have fallen significantly in both urban and regional areas. When adjusted for inflation, real house prices are now back at levels seen before the pandemic-driven surge, indicating a broad and significant market contraction. This widespread crash has resulted in homes becoming more affordable compared to the peak of the housing boom.
However, the road to recovery remains uncertain. Despite reduced mortgage interest rates, which have made borrowing cheaper for some buyers, the market has not seen a major rebound. This stagnation is largely attributed to a high inventory of unsold homes, which currently sits at 32,700 properties, approximately 1.8 times higher than during the last price boom in November 2021. As the supply of homes outpaces demand, the imbalance has further dampened any potential recovery in house prices.
Key Factors Contributing to the Housing Crash
Several key factors have contributed to the ongoing price decline in New Zealand’s housing market. The most prominent of these is the drastic imbalance between supply and demand. With new listings continuing to flood the market, sales turnover has failed to keep pace, further exacerbating the price slide. Additionally, the current inventory levels are far higher than what was seen during the peak of the housing boom, indicating it struggling to maintain momentum.
Moreover, despite a reduction in interest rates, there has been little movement in the broader market. Experts, including ASB bank economists, suggest that this is because the wider economy and housing market conditions have yet to stabilize. With the inventory still at record highs and no clear signs of cooling in new listings, house prices are likely to continue to face downward pressure.
Mortgage Repayment Affordability Improves
One of the few silver linings for New Zealand’s housing market crash has been the improvement in mortgage repayment affordability. As house prices have fallen and mortgage rates have been reduced, the ratio of dwelling prices to income has returned to pre-pandemic levels. This has provided some relief to potential buyers, particularly those who were previously priced out of the market during the boom.
Mortgage affordability, which was once a significant concern as house prices soared, has now improved significantly. For many New Zealanders, the prospect of purchasing a home is now more attainable than it has been in recent years. However, while affordability has improved, it is important to note that the overall housing market remains far from stable, with continuing challenges in terms of supply and price movements.
Comparison to Australia’s Housing Market
New Zealand’s housing crash stands in stark contrast to Australia’s approach to housing policy. While New Zealand has not introduced measures to directly stimulate demand, such as lowering deposit requirements or adjusting lending standards, Australia has seen various demand-side interventions aimed at boosting housing prices. Australian policymakers have implemented schemes like the 5% deposit plan for first-time buyers and changes to lending rules that exclude student debts from loan serviceability calculations.
In contrast, New Zealand’s government has refrained from similar measures, allowing market forces to determine the course of the housing downturn. This difference in approach has meant that while New Zealand’s housing affordability has significantly improved, the market has also experienced one of the most dramatic declines in recent memory. By not intervening in the market, New Zealand has allowed the correction to unfold more naturally, leading to a significant reduction in house prices and a shift in affordability for many buyers.
