Grim outlook for housing market over winter

Property / analysis

The latest figures suggest the housing market will continue stagnating over winter with too much stock on offer and not enough buyers

17th Jul 25, 9:00am by Greg Ninness

A surplus of stock for sale in a sluggish market has been a feature of the housing market this year and the latest indicators suggest that will continue at least until the end of winter and possibly into spring as well.

Property website Realestate.co.nz had 32,384 residential properties for sale at the end of June.

That was only up by 2% compared to June last year but last year's stock figures were also high.

To give some context to those figures, the stock for sale when the market was booming in June 2021 was just 13,861 properties, so stock levels have more than doubled (up 134%) since then.

High stock levels would not be a problem if there was a correspondingly high level of sales, but that's not the case.

Back in June 2021 when there were almost 14,000 properties for sale, the REINZ reported 7629 sales for the month.

In June this year when there were more than 32,000 properties for sale, the REINZ reported 5865 sales, down by 23% from the 7629 sales reported in June 2021.

So compared to the boom times of four years ago, stock is up 134% and sales are down 23%.

That's not a good combination and suggests there's an imbalance in the market between vendors wanting to sell their properties and potential buyers who are willing or able to purchase them.

That problem is also showing up in a couple of other figures - the market overhang and the market dropouts.

The overhang is the number of properties left unsold at the end of each month.

Interest.co.nz estimates there was an overhang of 28,550 residential properties at the end of June this year, up by 2.9% compared to June last year but up by 294% (that's right, almost three times as much) compared to June 2021.

Unsurprisingly, there has also been a big increase in the number of properties being withdrawn from the market (the dropouts), which interest.co.nz estimates has ballooned from just under 1200 in June 2021 to around 3800 a month currently, an increase of 225%.

What is particularly troubling about trends that are highlighted by the figures above, is that they have persisted during a period in which mortgage interest rates have been declining, with the average two year fixed rate sliding from 7.04% in November 2023 to 4.96% in June this year.

Declining mortgage rates, especially such substantial ones, are supposed to be stimulatory for the housing market, but so far, that hasn't happened.

And the longer the current market conditions continue, the more likely it becomes that the market isn't just in a temporary slump, it's headed for a more substantial structural adjustment.

In a worst case scenario that could mean a crash, or it may mean a slow deflation or just an extended period of stagnation, but time will tell.

Whenever the housing market gets tough, there are always plenty of industry pundits who claim to see the light at the end of the tunnel.

Let's hope it's not a train.

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32 Comments

by NZGecko | 17th Jul 25, 10:39am 1752705598

Quick, quick! says Jarrod Kerr and all the REAs.......raid everyone Kiwsavers!!! Pronto!

The Bankers Housing Ponzi must be repumped with short term steroids!!!

Who cares if the Kiwisaver drops -30 or -60% after plunging it into a crashing housing market??? that is still massively overpriced.

Apparently, pensioners can feel quite full, after digesting gib board. I don't recommend if however!

by IT GUY | 17th Jul 25, 10:54am 1752706486

OMG he used the "C" word.....

It always seems darkest... just before it turns Pitch Black. Only a few months ago this article was appearing as DGMer type comments here... my how things have changed and the DGMers have been proved rather to be just accurate forecasters of reality.

Spruikers standing naked are no longer even commenting here and its not even low tide....

by Averageman | 17th Jul 25, 11:27am 1752708439

Even TonyA calling a retreat in spec town. Cant make a return because the goose is over cooked.

https://www.oneroof.co.nz/news/tony-alexander-four-house-price-drops-in…

by BradJ | 17th Jul 25, 11:51am 1752709919

How much due to consumer resistance to rubbish construction, no outdoor space, no car parking, no longevity.

by Phoenix (FKA JC) | 17th Jul 25, 2:23pm 1752719015

How much due to consumer resistance to rubbish construction, no outdoor space, no car parking, no longevity.

In the 80s in the parallel with their land speculation Ponzi, there was a certain element in the Japan construction industry that was taking people to the cleaners based on providing shoddy product at high cost.

After everything went to seed, the industry had no choice but to focus on quality and value - or else no sale. This had some positive impacts - one being that companies like Sekisui became world beaters in building materials and housing product.

Aotearoa could never replicate the likes of Sekisui.

by rastus | 17th Jul 25, 9:19am 1752700742

$1 reserve probably the best option now.

by Independent_Observer | 17th Jul 25, 9:44am 1752702281

Here's a chart of NZ house prices going back to the 1960's (I prefer this to those available on this site as they appear to now be limited to only the past 5 years or so of data - from which it is impossible to view any longer term trends and/or anomalies).

https://fred.stlouisfed.org/series/QNZN628BIS

40 years of falling interest rates from the 1980's has seen (in my opinion) unsustainable growth rates in house prices.

2008 looks to me like a bubble that was meant to burst but was saved by QE and 2021 looks like a bubble built on a bubble.

Canada is in the same predicament - here is there housing market in real terms:

https://fred.stlouisfed.org/series/QCAR628BIS

If this returns to the pre-2000 trends, they're looking like their market is still around 60% overvalued (NZ more or less the same in real terms).

by hamishk1 | 17th Jul 25, 10:10am 1752703845

Thanks for that graphs, Independent Observer. Most enlightening. Your comments are close to the mark. At the end of the day, houses are only worth what people can afford to pay for them. I have read that in the most bubbly markets in NZ (namely AKL, WLG), it's likely that 2021 peak prices won't be reached again (in real terms) until the mid 2030s. Most concerning for those people who have invested in the big cities in recent years, but not so alarming for those who have invested in the regions and smaller towns, where prices seem to be holding up quite well.

by IT GUY | 17th Jul 25, 10:58am 1752706680

At the end of the day, houses are only worth what people can afford to pay for them.

That's the issue, while they where being treated as financial assets vs Homes, people where prepared to borrow as much as possible to get the capital gains on offer. Its a long way back down if capital gains will only match wage inflation, IMHO we are 1/2 way there, but markets often overshoot.

Its worth paying a big mortgage if you house is making more in cap gains then you make in salary, once that stops its not worth paying $1500 a week anymore, therefore no other sucker wants to take your bag to hold.

Re the regions, traditionally the big cities have lead, IMHO this will happen eventually.... demographics may change this however as city folk move for retirement, lets see.

by interesting1234 | 17th Jul 25, 12:54pm 1752713655

demographics may change this however as city folk move for retirement, lets see.

I'm interested to see this play out also. Take the average age of farmers reported in 2024 as 67, and the impending need for housing closer to medical care when the body wears and they cannot manage the physical tasks they used to. All it takes is a decent health scare for either spouse to realise it isn't sustainable anymore, and the need grows to look for somewhere closer to a town or city. Many will be happy to downsize, some may want family sized homes initially then downsize by choice or by necessity if one passes on and the other cannot maintain the section etc.

by IT GUY | 17th Jul 25, 3:42pm 1752723753

You really want to be in the Grafton hospital pickup rather then Middlemore in AKL...

by interesting1234 | 17th Jul 25, 5:14pm 1752729298

I’d rather be on the other island personally, but horses for courses.

by Independent_Observer | 17th Jul 25, 12:42pm 1752712966

In real terms, the house price we witnessed may never be reached again in our lifetimes (note that before around 1990 house prices in most developed nations were quite flat in real terms for the previous 100 years of data I've looked at - ie they went up at or around the general level of inflation. Which makes sense as they are priced by rents and wages which are the cash flows set in combination with/by the level of general consumer inflation eg what people get paid and can afford to pay for rents and mortgages).

In nominal terms its a different story.

For house prices to peak again in real terms, then you need prices to continuously grow faster than the general rate of inflation. But this is completely unsustainable over the long term. It only works when interest rates are in the continuous fall - for years or decades (meaning people can load up with more debt and resulting ever higher prices paid while interest expense rises at or around the general inflation level). And we've just witnessed that for the past 20-30 years. We may now see the reverse of that process for the next 20-30 years.

Watch the bond market and futures - the US 20year bond ETF (ticker TLT) was trading at $160 in 2020. It is now trading at half of that (ie a 50% drop). It is telling the story that future inflation is going to be greater than the cash flows promised on the coupons of that bond (meaning the bond now is only worth half of what it was 5 years ago if traded in the current market). My theory is that house prices and rents are the same. People paid too much in 2020 for houses in which future inflation (and thereby interest rates) mean the future cash flows associated to those assets (rents and wages paying mortgage interest costs) do not justify the prices paid. And as such I still think there is a risk we're only about halfway through the current drop in prices in real terms (not sure about nominal terms). I think a 50% drop in real terms is quite possible and depending on where you look in the country its anywhere from 20-40% right now.

by 11boomer11 | 17th Jul 25, 9:34pm 1752744879

The same was said in 1988 and every decade since. Though the gnats are working their butts off to change the trends, by crashing the rma and smashing the rural urban boundary. I don't know if 3 waters services will keep up, we'll see

by Speedmax | 17th Jul 25, 9:05pm 1752743120

…but great for FHB. Perhaps if housing costs continue to fall we might even stem the flow of smart hard working young people from the country.

It staggers me that even articles like this characterise house price rises and good and falling market as bad….

by HGWR | 17th Jul 25, 10:10am 1752703806

Let's hope it's a train.

by Averageman | 17th Jul 25, 11:21am 1752708068

IMO to many vested interests and "hold on for grim death" type owners for a crash to unfold unless the banks start "evacuating" the leverage like post 1987. That said if you look at the price retreat combine with inflation we are already well in "crash' territory the vested are just in denial. Can see slow deflation or just an extended period of stagnation as the most likely to option.

So a slow rotting for speculand as their equity ever decreases, if they had any in the first place.

Popcorn.

by Independent_Observer | 17th Jul 25, 12:16pm 1752711397

Half of the boomer generation will be deceased on the next 10 years. And on my street alone it is primarily widowed women in their 70's and 80's living in 3-4 bedroom homes.

There is going to be much more supply coming to the market in the next decade as these homes are listed and the remaining boomers downsize into 1-2 bedroom/retirement living situations.

by NZGecko | 17th Jul 25, 12:32pm 1752712374

Some of these expiring Boomer pads will be converted by the slave labouring Chinese builders.......into 8x more homes....

Homes as far at the eye can see, and stuff all occupants.

Specuvester, has a case of bad brown pants:)

by 11boomer11 | 17th Jul 25, 1:33pm 1752716036

Half of the commenters here are boomers lol

by Independent_Observer | 17th Jul 25, 1:37pm 1752716249

At a guess I'd think its mostly Gen X on here (people in 40's - 60's) with a few older ones (boomers) and a few younger ones mixed in.

But perhaps since only those with spare cash to pay to comment yes its possible that it is more boomers now than in the past.

Hard to tell.

by nigelh | 17th Jul 25, 3:49pm 1752724162

I'm not sure how typical our situation is. An old couple, in the 70-80 bracket, in a 3 bed roomed 155m2 house. A do up on some of the internals. When I look at two bed roomed 100-125m2 house and see the rates and likely insurance value, it's just not worth it. If one of us goes then a one or two bed roomed 90-100m2 is worth the change. Other than for company and social activities I'd be reluctant to move into a retirement village. Just not financially worth it. ~$800k for an 80m2 odd villa as they call it. In your own house you can pay for a lot of services.

by singautim | 17th Jul 25, 5:28pm 1752730130

Whether $800k is a bad or good buy depends on what you are planning to do with your money. We want to leave it to our children. Which has two risks - (1) we live too long and the kids are retired and the grandchildren grownup before we die (2) one of us needs permanent care and then all savings are eaten up by the govt except for our owner occupied house. So my Missus and I are hanging on to our large section with 5-bedrooms and three showers, etc. Pity we can't afford to keep it in good repair.

by Independent_Observer | 18th Jul 25, 10:03am 1752789782

Another risk is that other people of the same circumstances as you have the same plan as well singautim and there is a rush of 3-4 bedroom homes to the market about the same time (e.g. in 5-10 years from now when you are all around 80) and you find that the house as a store of wealth, wasn't what you were expecting it to be (e.g. could fall further in price as supply is far greater than demand for 3-4 bedroom homes and you find it becomes impossible to maintain as you age so is less attractive to a future buyer due to the work required to bring it back to where it was in its past).

As I say, about 75% of the houses on my street as in the same predicament as you (although they all unfortunately widowed oddly..the only solo male moved to nursing home last year) so I think there could be a real flood of family size homes coming to market in the next 5-10 years as everyone in the 70-80 age bracket (boomers) all try to downsize simultaneously (or within a few years of one another).

by EpsomArtsandCrafts | 17th Jul 25, 12:03pm 1752710626

Auckland is overpriced in my opinion. There isn't very good value for your money and the agents are barriers to stopping the market dropping to its floor.

The high number of houses being withdrawn reflect incorrect assumptions of the market and house values by the vendors and agents

by Averageman | 17th Jul 25, 1:18pm 1752715111

Agreed. Will Agents positioning high fantasy price just to get listing be the noose around the neck of owners as prices continue to decline. Consider being told X when its clearly lower at Y and further declines to Z. Could the owner have a case to sue the agent for misrepresentation at a later point...?

by IT GUY | 17th Jul 25, 3:44pm 1752723872

No agents do not provide financial advice.... a valuers report out of sync with market could, but read their fine print.... = no liability.

by IT GUY | 17th Jul 25, 4:02pm 1752724978

First the article uses the "C" word then TA uses the "Y" word.. what next .............. its madness

next people will be valuing houses on cashflows...

Investors are like sharks, they will feed on the weakest ... Every market represents value at the right price.

But for investors, I can tell from the comments submitted in some of my surveys that there is increasing discontent at the lack of capital returns, rising costs and deepening difficulties in finding and keeping good tenants. The shoe is on the other foot – a huge shift in the balance of power from as recently as a year-and-a-half ago. More investors are looking to sell.

At the same time, more investors are looking to buy. But they are quite discerning, are motivated by hopes of achieving a bargain, and are likely to be paying far more attention to yields now that there is widespread acceptance that prices will not rise at the speed they did on average from 1992.

by 11boomer11 | 17th Jul 25, 4:10pm 1752725443

You've lost us, what are you talking about.

by IT GUY | 17th Jul 25, 5:30pm 1752730237

Todays lesson is bought to you by the letters

C for Crash

and

Y for Yield

two words which must never be spoken around residential housing valuations...

by NZGecko | 18th Jul 25, 8:47am 1752785244

Yeilding to good sense and the parables of bubble markets, are what investors should have done, over the last 10 years.

by Time Lord | 17th Jul 25, 5:42pm 1752730967

Yield’s are down, irony is up