House prices are languishing even as interest rates decline but sales volumes are holding up

The housing market is ticking along OK considering it's in the depths of winter, but asking price is the key determinant of whether or not a property sells, and there are a lot of disappointed vendors out there.

According to the Real Estate Institute of NZ, 6319 residential properties were sold in July, which was up 6% compared to July last year and up a whopping 25% compared to July 2023.

So from a sales perspective, July wasn't such a bad month for the housing market.

Selling prices on the other hand have remained relatively weak but stable.

Although there have been monthly movements up and down, the REINZ's median selling price has been bouncing around between $750,000 and $800,000 since December 2022.

That's well down from the exceptional highs of 2021 and 2022, when the REINZ median price peaked at $925,000, but since prices dropped back precipitously in late 2022, there has actually been very little sustained price movement in either direction.

The last time prices remained this flat was in the three year period from November 2007 to December 2010, which coincided with the lead up to the Global Financial Crisis and its aftermath.

What has taken many people by surprise is that prices have remained so flat when mortgage interest rates have been falling.

Between November 2023 and June 2025, the average two year fixed mortgage rate declined from 7.04% to 4.96%.

Conventional thinking is that such a large decline in mortgage rates should have resulted in a substantial increase in house prices and a corresponding flow on effect of lucrative capital gains for existing home owners, while holding out the prospect of future capital gains for new buyers.

But this time around, none of that has happened.

The main culprit appears to be a build up of unsold stock on the market over the last two years, with the total residential listings on property website Realestate.co.nz increasing from 23,090 in July 2023 to 30,430 in July 2025, an increase of 32%.

Over the same period, sales have increased by 25%, so stock for sale has been rising at a faster pace than sales, which has resulted in a buyer's market.

This is also showing up in the overhang of unsold properties on the market at the end of each month, which has increased from 19,773 at the end of July 2023 to 26,065 at the end of July this year, up 32% over the last two years.

So what does all of this mean?

Essentially, properties are still selling, as evidenced by the higher sales numbers over the last two years.

The key determinant as to whether whether a property sells or not appears to be the asking price.

There appears to be too many vendors who are looking back at the much higher higher prices that were being achieved during the 2021/22 boom, and are expecting to achieve something close to that now.

These are the properties that are being left sitting on the market at the end of month, while those that are realistically priced to current conditions are the ones making a sale.

This is also showing up in the number of properties being withdrawn from the market by disappointed vendors each month, which interest.co.nz estimates has risen from 2672 in July 2023 to 3372 in July 2025, up 26% over the last two years.

That situation appears likely to continue, even in the face of further interest rate cuts.

Properties that are realistically priced will likely find a buyer, while those that are not meeting the market are likely to languish.

The charts below show the monthly movements in the REINZ's selling prices and sales volumes by region, going all the way back to 1992.