Why NZ Property Values Are Sliding and the 10-Year Growth Reality

Kelvin Davidson (00:00):
The peak still matters for a lot of people if they bought at the peak, but that's not everybody. And I think if you do sort of smooth it out, you can get a more, I guess sort of, more objective view on how the market's been going over that period. And possibly, just possibly, we're already in a new phase where growth could be slower.

Nick Goodall (00:01):
Kia ora, and welcome to the New Zealand Property Market Podcast, brought to you by Cotality for the 6th of October 2026. I'm Head of Research, Nick Goodall, and today I'm joined, as per usual, by our Chief Economist Kelvin Davidson. Kelvin, I'm back from a great long weekend away in Rotorua, and you are now away on holiday in Hanmer Springs. But we have got a podcast to release, so let's get into it, mate. How did the Home Value Index release go last week?

Kelvin Davidson (00:25):
It was a good release. It is a case of trying not to use the phrase "more of the same," but the market is in a holding pattern really, in terms of the underlying data itself. We saw a 0.3% fall in property values at the national level in September, which just extends that soft run of falls we have seen through the winter months. Property values are certainly not collapsing. If you look at the annual change, the national index is down about 1.3% over the 12-month period ending September. So, while we are not seeing values collapse, there is still clear caution out there, and property values are continuing to slide slightly lower.

We are seeing the same regional stories. Auckland and Wellington continue to slide lower. Among the other main centres, Christchurch and Hamilton managed to sneak a little bit higher. But the regional markets and the next tier of secondary towns and cities were a wee bit weaker than what we had seen in previous months. We saw Queenstown values go up slightly, but almost everywhere else was down. New Plymouth, Palmerston North, and Napier all recorded declines, and even Invercargill slid slightly lower. So, the data in September carried a slightly softer tone.

But looking at the bigger picture, values are definitely not collapsing. Buyers have held the pricing power for a long time, but at the same time, sellers are not having to capitulate. We will talk about the labour market shortly, but because most people with mortgages have largely kept their employment, they are able to hang on. They can leave their property on the market a little bit longer rather than giving in to a heavily discounted price offer. So, there is a bit of balance there, even though property values are sliding slightly lower because buyers hold more leverage.

This holding pattern is not surprising given the sluggish economy, mortgage rates sneaking higher lately, and persistent cost of living pressures. We are not seeing employment fall dramatically, but we are not seeing a massive amount of new hiring yet to soak up the excess unemployment. The general election is also coming up, and while Labour's announcement to retain mortgage interest deductibility for landlords is an interesting policy, it was too soon to have any influence on the September numbers. Given the broader economic headwinds, it is going to be hard to see that tax policy having any material influence on transaction volumes in the next couple of months either. There is still significant uncertainty, and people are taking a "wait-and-see" approach. By the time we get through the election, the coalition negotiations, and the summer holidays, it is probably going to be a "let's come back in February" scenario to see how the market looks then. It is ticking along, but generally, people are still pretty cautious out there.

Nick Goodall (03:06):
Yeah, I think there are a couple of things that stick out to me. One is that when we look at the other main urban areas outside the largest six centres that we track, the majority of them have now turned negative on a monthly basis, showing broader weakness. Previously, it was primarily the main centres that were struggling while some of these regional areas continued to see growth. The fact that this weakness has now extended out to the regional markets is a sign that the economic slowdown is encapsulating more of the country, which reflects the broader economy.

We have spoken a lot about how regions tied closer to the agricultural industry have done better, but uncertainty is weighing on every market. Right now, we have some of the most expensive petrol prices we've seen all year, worse than what we saw earlier in the year when the Strait of Hormuz was first closed and the Middle East conflict started. Things are still tough out there for households. We spoke last week about businesses getting on with things, which is excellent, but you cannot just keep battling on forever. That economic uncertainty is weighing on the property market right now.

While Labour's policy announcement regarding interest deductibility removes one tax uncertainty for landlords, it is not going to cause a flood of investors to return to the market immediately. I also liked your terminology of a "slow grind down." This is not a sudden plunge where values are falling away dramatically. Even if you annualise a 0.3% monthly fall, you are looking at roughly a 4% annual decline in prices, which is noteworthy but not a collapse.

In terms of expectations for the future, it does feel a bit depressing to say we have to wait until February next year to see how the market recovers, but it is hard to disagree with that timeline. We are getting closer to the election, and there is likely going to be a prolonged negotiation period for coalition partners regardless of who wins. That is going to drag the uncertainty out longer, meaning it will take time before we see renewed confidence in the economy and the housing market.

Anything else from the September Home Value Index release you wanted to cover, Kelvin? I know you took the opportunity to recontextualise the peak-to-trough conversation by looking at a 10-year growth horizon. Can you expand on that before we look at the August filled jobs data?

Kelvin Davidson (05:56):
Yes, we have had a few comments coming in lately from presentations, in-person meetings, and media commentary asking if it is time to move on from comparing current values back to the late-2021 market peak. It has been a long time since that peak, and while tracking how far prices are down or which regions are back to peak is interesting, the late-2021 COVID peak was an artificial bubble.

Now, this peak-to-trough decline matters immensely for people who bought at the absolute top of the market and find themselves in negative equity. We do not want to downplay that at all because there are people who have seen their paper wealth fall significantly or have had to crystallise a real loss. That is a major concern. But when we look at the transaction data, only about 4% to 5% of all New Zealand properties actually changed hands during that rough, peak-boom period. For the vast majority of property owners, that peak is completely irrelevant.

So, I wanted to look at things differently by analyzing the 10-year annualised growth rate up to September 2026. This allows us to smooth out the pre-COVID, COVID-boom, and post-COVID correction phases to get an objective view of the market's trajectory. Interestingly, over the past decade, the national median property value has grown at an annual average rate of 3.2% per year.

We have been discussing whether the market is shifting into a new phase of lower capital growth. The fact that the 10-year annualised growth rate is already down to 3.2% shows we might already be in that lower-growth environment, which is a significant drop from the historical long-run average of 6% or 7% that people hold in their minds.

There are still regional markets that have delivered strong growth over that 10-year period—Whanganui averaged 8.4% annualised, Invercargill was 8.2%, and Gisborne was 7.5%. But when you look at Auckland, which represents over a third of our population and housing stock, average annualised growth over the last ten years sits at just 1.2%. This sluggishness is a direct reflection of housing supply. The Auckland Unitary Plan came into effect in 2018, and it showed exactly what can happen to capital growth when you ramp up new construction, intensify land use, and build a wider range of high-density housing types.

While regions like Gisborne, Invercargill, and Whanganui will not sustain 8% growth forever, their strong performance is a signal that more houses need to be built. If they can get supply up, those regional growth rates will likely slow down to match Auckland and Canterbury’s balanced trajectories. Standardising the data over 10 years confirms the peak still matters to some, but it provides a much more objective long-term perspective. And it suggests that factors like medium-density zoning, tax policy, debt-to-income (DTI) limits, and interest rates are already restraining capital growth.

Nick Goodall (10:55):
Absolutely. That 10-year benchmark is an excellent addition because it contextualises what the market has been through over a cycle. If you draw a line from the start of 2020 through to today, it shows a much more normal capital growth trajectory, proving how unusual the pandemic boom and subsequent decline actually were.

While the peak still affects the consumer mindset because transaction data is public and people know what their neighbours sold for, this recontextualisation is crucial. It also highlights the impact of zoning. Many other parts of the country are now adhering to the Medium Density Residential Standards (MDRS), enabling three units to be built on a single site without a resource consent. This policy has not been around as long as the Auckland Unitary Plan, but we are likely to see the same supply-driven moderation of capital growth spread across Wellington, Tauranga, Hamilton, and Dunedin. That supply expansion has improved housing affordability in Auckland, creating accessible entry-point townhouses for first-home buyers, and that is a positive outcome.

Let's look at the labour market. We constantly reference employment when looking at the future of the housing market. The August filled jobs data was released last week. Kelvin, can you take us through those numbers and explain how they relate to the official unemployment figures that the Reserve Bank tracks?

Kelvin Davidson (14:52):
August filled jobs rose 0.2% month-on-month, with annual growth compared back to August last year sitting at 0.9%. Any rise in filled jobs is positive, and given the economic pressures over the last six or seven months, a 0.2% monthly increase shows real resilience.

As we have discussed, employment has been protected in this cycle because firms are hoarding labour. Businesses do not want to find themselves short of workers when the economic recovery arrives. This does mean that hiring and jobs growth will be slower to pick up during the recovery because firms already have the staff they need. We will need a sustained economic upturn before we see a major acceleration in hiring.

Regarding unemployment: there are multiple labour market indicators published by Stats NZ, including the Household Labour Force Survey (HLFS), the Monthly Employment Indicator, and the filled jobs data which is compiled directly from IRD tax records. These metrics do not always move in unison. A rise in filled jobs from tax records does not guarantee a direct fall in unemployment in the HLFS, which is the official benchmark survey.

This is because the unemployment rate is heavily dependent on the supply side. If the working-age population or the participation rate grows faster than the rate of job creation, the official unemployment rate can still rise even as the total number of jobs increases. That is exactly what we have seen recently: filled jobs have grown, but the unemployment rate has risen because net migration and school-leavers entering the workforce have outpaced new hiring activity.

Currently, migration is low, meaning our working-age population is not expanding as rapidly as it did previously. Consequently, most forecasters, including the Reserve Bank in their latest Monetary Policy Statement, expect the unemployment rate to peak around the current 5.6% and begin to drift lower next year.

There are still clear economic uncertainties—such as high petrol prices, which have us seriously evaluating a hybrid or electric vehicle at the moment. But the fact that we have resilient jobs data suggests that as the labour market strengthens into 2027, we should see an improvement in property sales and house prices. Homeowners can sustain higher interest rates if they remain confident in their employment and income security. The labour market is critical, and a stronger employment story next year will flow directly through to the housing market.

Nick Goodall (19:47):
That is an excellent explanation. High youth unemployment is a major economic concern, but because young people are generally not homeowners, that labour market weakness is not triggering a massive wave of forced mortgagee sales. However, underemployment and youth unemployment do impact the investment property market because young people are staying home longer or flatting in larger groups rather than renting on their own, which suppresses rental demand.

Last week, we also received the Pre-election Economic and Fiscal Update (PREFU) from the government, detailing the updated state of the public finances ahead of the election. Did you take any key insights from that release, Kelvin?

Kelvin Davidson (21:16):
I am no expert on the public finances, but the government books looked slightly better than the market had expected. However, those expectations were very low. The government is still a couple of years away from achieving an annual operating surplus, let alone reducing our national debt levels, so significant fiscal challenges remain.

The Treasury took a highly cautious view on future house price growth in their forecasts. I got asked about this by journalists, including on the Mike Hosking show. This cautious outlook is not a surprise; most market commentators are already predicting a lower-growth environment. There are some questions about how lower property growth will affect Labour's projected Capital Gains Tax revenue if they are in a position to form a government, but the Treasury's assumptions seem reasonably close to what Labour has budgeted. Ultimately, the market is focused on the election itself rather than the PREFU projections.

Nick Goodall (23:17):
The Treasury's revised forecasts reinforce the expectation that house price growth will remain low in the short term, running well below the long-term average of 3% before gradually recovery over the next couple of years. This aligns with our analysis of Labour's projected Capital Gains Tax revenue, which requires 2.5% to 3% annual growth. A capital gains tax would also create a "lock-in" effect where investors hold onto properties longer to avoid triggering the tax, leading to a temporary reduction in sales volumes. The Treasury's cautious revisions reflect the soft data we have seen over the past nine months.

Looking ahead, we have the release of the Cordell Construction Cost Index (CCCI) for Q3 out this week, alongside our September buyer classification figures to round out the quarter.

Enjoy your holiday in Hanmer Springs, Kelvin.

Kelvin Davidson (24:58):
Thanks, Nick. I will be in Hanmer Springs but I certainly will not be tuning out of the property and economic news.

Nick Goodall (25:10):
I had a fantastic family holiday in Rotorua. We did the luge, the hot pools, and kept the kids busy.

On the sports front, I am pleased to see Counties Manukau retain the Ranfurly Shield, and Northland finishing second on the NPC standings is an incredible achievement heading into the finals. I am off to the Bledisloe Cup at Eden Park this weekend. The Wallabies are looking stronger after pushing the Springboks, while the All Blacks are carrying some injuries. It is going to be a massive test match at a fortress where the All Blacks have not lost in 40 years.

How are your holidays going in Hanmer Springs?

Kelvin Davidson (27:22):
Hanmer Springs has been great. The weather is warmer, the family pools and hydroslides are excellent, and it feels like half of Lincoln is up here.

Regarding the Wallabies: Mark Nawaqanitawase won the NRL Premiership with the Roosters and is now heading back to rugby union. He is an incredible player, and his return will make Australia a dangerous side at the World Cup next year.

Nick Goodall (29:00):
He is an outstanding player. There was also discussion on the Aotearoa Rugby Pod about whether New Zealand could ever lure Kalyn Ponga back to rugby union given his aerial skill under the high ball, which is a clear area of weakness for the All Blacks.

We will wrap it up there. Enjoy the rest of your holiday, Kelvin, and shut down your laptop. Thanks to everyone for listening. Please get in touch with any questions or feedback. My name is Nick, he's Kelvin. You've been listening to the New Zealand Property Market Podcast. Mā te wā.