Georgina Bond
The latest property figures might offer some on-paper reassurance for homeowners and investors, but as the Middle East conflict ramps up fuel prices and rattles global markets, few will be banking on those gains as April gets underway.
Property values across New Zealand rose 0.2% in March, marking a second straight monthly gain, according to Cotality NZ’s latest Home Value Index (HVI) report.
That pushed the national median value to $802,599, although prices remain 1.3% lower than a year ago and more than 17% below their 2022 peak.
Cotality NZ chief property economist Kelvin Davidson said back-to-back increases in property values would typically hint at a market turning point.
However, the current climate is markedly different, with the economic ripple effects of the Iran conflict, including higher petrol and diesel costs and rising wholesale interest rates, now filtering through to households and businesses.
“The Iran conflict is throwing an extra layer of uncertainty over everything,” he said.
“In the property market, values were already still proving slow to respond to the falls in mortgage rates since mid-2024 and the nascent economic recovery.
“The missing piece has probably been a confidence factor and now, in light of the latest conflict and sharply higher fuel prices, it’s difficult to see housing sentiment or property values lifting sharply in the near term.
“Of course, there are always two sides to the coin. While some sellers and owners may not be too pleased with current housing conditions, first home buyers are capitalising – provided that they feel secure about their jobs in this current uncertain environment,” Davidson said.
“In a nutshell, both the economy and housing market still face a testing period ahead.”
Variability across the country
Across the main centres, the picture remains uneven.
Christchurch and Dunedin led monthly gains, up 0.6% and 0.7% respectively, while Auckland and Tauranga were flat and Hamilton and Wellington edged down slightly.
Wellington continues to be one of the weakest parts of the country, with values almost 25% below their peak, while Auckland remains down more than 23%.
In contrast, some regional markets, particularly in the South Island, are holding firmer. Invercargill stands out, with values rising 7.1% over the past year to a new peak, alongside several other South Island centres (Westland, Ashburton, Timaru, Central Otago, Southland District and Gore) with strong farming bases.
But even those stronger areas are exposed to the same developing economic pressures, Davidson said.
“Even in these areas, the Iran conflict puts a new level of uncertainty into the mix, especially around diesel supply for primary production. In other words, housing market activity and prices in most if not all parts of the country are vulnerable to this developing economic shock.”
Market outlook
Davidson noted the Reserve Bank remains on high alert and, although there won’t necessarily be any knee-jerk Official Cash Rate rises in the short term, mortgage rates are still being driven by a broader set of global factors.
“Global uncertainty stemming from the Iran conflict and concerns about wider inflationary pressure have already seen interest rates rise in world money markets, and that’s flowed through to mortgage rate lifts at some NZ banks.
“Many households will be watching that very closely and recent data shows there’s recently been a strong shift by borrowers towards fixing longer.
“That will give some sense of security to individuals, but for the wider housing market the risks of higher inflation, rising interest rates, and/or a softening economy both point to headwinds,” Davidson said.
“Indeed, our modelled forecast for property sales to rise from around 90,000 last year to 100,000 this year is starting to look a stretch. In the end, though, everything is a watching brief at the moment when it comes to the economy and housing market.”
“Values managed to rise in March, but the longer the conflict goes on the greater the chances that they weaken again in the coming months,” Davidson said.
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