Eckhold said Westpac was forecasting small, positive increases in house prices over the final three months of 2025 – taking growth to around 0.6% over the year.
“This year to date we have seen no growth in house prices at the nationwide level,” he said.
“The housing market remains comatose after the excesses of the Covid era.”
Eckhold said house prices rose at a “rapid clip” through most of the period between the Global Financial Crisis and the onset of the Covid pandemic.
“Real house prices rose at an astonishing 6% annual rate that decade … few other developed markets achieved such growth,” he said.
Canada was the nearest comparator, with house price growth of under a 6% annual rate in real terms, while Australian house prices rose at a considerably slower 1.3%.
But this was further exacerbated by Covid-era support from the Reserve Bank, including a reduction of the Official Cash Rate (OCR) to 0.25% in March 2020, significant quantitative easing and the removal of restrictions on housing lending.
“These accommodative policy settings supercharged a housing market that already had significant momentum,” Eckhold said.
“The result was a severe and unsustainable spike in house prices in both real and nominal terms.
“But the fundamentals underlying these price rises were not sustainable as ultimately inflation and interest rates rose significantly, and house prices fell.”
Annual house price growth in New Zealand hit 26% in 2021, significantly higher than the past 10-year average of 7%. Growth has declined since then at -13% in 2022 and -1% in both 2023 and 2024.
Eckhold said its forecast for 2026 has two-sided risks.
“Low interest rates imply attractive valuations for investors … and that momentum could continue to build once the labour market improves. That said, the rental market also appears to be somewhat oversupplied at present, as reflected in downward pressure on rents.
“On the other hand, it’s possible that population growth could remain slow, especially if the labour market takes longer to recover. A slower rate of household formation would likely mean less upward pressure on house prices, especially if the construction of new homes remains at current or higher levels.”
Cameron Smith is an Auckland-based business reporter. He joined the Herald in 2015 and has covered business and sports. He reports on topics such as retail, small business, the workplace and macroeconomics.