$4800 gone in one city in a month: When will house prices stop falling?

House prices have fallen again - but have we reached the bottom?

New Cotality data shows that national property values fell 0.2 percent in June, which chief property economist Kelvin Davidson said was probably related to uncertainty around the Middle East conflict, and rising interest rates.

Over three months, values were down 0.8 percent. They were down 0.9 percent from a year ago and are still down 17.5 percent from the peak, or $170,875 per property.

The median value is now $806,512 nationwide.

When adjusted for inflation, the drop is more like 30 percent.

Christchurch and Dunedin both recorded increases in values in June but Tauranga, Wellington and Auckland experienced falls. Auckland's was the biggest of the main centres, down 0.5 percent in a month. Within Auckland, Manukau was down 0.7 percent in June.

In dollar terms, Auckland's house price fall was $4854 for the month and $323,070 from the peak.

"We've already seen sales volumes continue to weaken a bit as each month passes in 2026 and that has meant the supply of available listings on the market and buyers' choice remain high," Davidson said.

"That in itself will tend to restrain property values, but on top of this we've also had the Iran conflict rumbling on since early March, with associated adverse effects on economic activity, sentiment, inflation, and mortgage rates.

"Granted, the peace deal has improved the economic outlook. But the lagged effects of previous uncertainty are pretty clear to see in June's property value figures."

He said recent falls in mortgage rates might improve buyer confidence but conditions were still in buyers' favour.

Central Wellington recorded a drop of 0.9 percent in June, and 1.7 percent in the quarter.

"There's a sense that the looming election is becoming a factor influencing the property market in general across the country, and this effect could be even more pronounced in Wellington given its concentration of core government services. Sellers may continue to have a difficult time as the year progresses," Davidson said.

Even Queenstown dropped a little, down 0.3 percent in June. Invercargill, which had previously been noticeably resilient, was down 0.2 percent.

"There's no doubt that most segments of the agricultural sector are doing very well at present and this will tend to support provincial property markets.

"But the generally softer tone of the property value data in June is a reminder that sentiment and higher financing costs also matter greatly too."

'House price stasis'

BNZ chief economist Mike Jones said it was hard to see anything breaking this period of "house price statis", which had persisted for the past three years.

"National house prices stopped falling in the autumn of 2023 and have been flat since. Given heightened inflation over that same period, real house prices have been slowly deflating and our forecasts essentially have that continuing into next year.

"Our work indicates that, despite some retrenchment in recent years, NZ still stacks up as middling-to-elevated in a global comparison of typical house price valuation metrics. That doesn't imply house prices need to fall further or can't lift from here. There's still a cycle. But it does support our sense there's downside risk on our house price inflation forecasts for this year [for no price movement] and next [for an increase of 4.5 percent].

"With the interest rate easing cycle now behind us, I think any recovery in house price inflation will depend on whether rising migration, a slowly improving economy, and a steadying labour market can offset the headwinds from rising mortgage rates. It's also worth noting that the supply pipeline still looks relatively healthy. So there are lots of balls in the air and plenty of uncertainty but, overall, I suspect think any recovery will be tepid."

Squirrel founder John Bolton said history suggested a market recovery would take about a decade which could mean it was 2031 before prices were back to their 2021 peak.

"Even once prices are back at their 2021 peak in dollar terms, they'll still be down roughly 20 percent in real terms. And there's a genuine question in my mind as to whether we'll ever get that back-or whether what's happened has sparked too much of a shift in the way New Zealanders think about property."

He said younger people now were more comfortable investing in shares and might no longer think property was the key to building wealth.

Bolton said prices might be at the bottom in nominal terms but still had further to go when adjusted for inflation.

Davidson agreed. "There are a lot of listings out there, buyers know they have the pricing power but also sellers aren't capitulating. Everybody's got a wee bit of power and it's keeping prices pretty flat. I guess for every person who might be under a bit more pressure to sell there are others who don't have to rush."

He said he expected prices to keep "bumbling along the bottom" with a bit of risk of further falls.

But he said the improvement in fall in prices and improvement in housing affordability of the past four or five years should limit the extent to which prices could drop further.

Infometrics chief forecaster Gareth Kiernan said the labour market would be an important influence. "There's probably still a bit of weakness in the near term and it's been interesting over the last few months seeing the stock of properties for sale just edging back up again.

"Until you've started to run that down a bit., it does act as something of a cap on house prices in the near term... it's flat probably this year then if you are starting to absorb that excess stock you might start to see a bit of upward momentum next year."

Sign up for Money with Susan Edmunds, a weekly newsletter covering all the things that affect how we make and spend money