Mortgage broker issues house price warning – RNZ

David Cunningham, CEO of Squirrel mortgage brokers, warns that New Zealand house prices may fall due to low consumer confidence, increased housing supply, and diminished immigration. With buyer anxiety peaking over interest rates and employment, the market faces a correction, particularly in Auckland and Wellington, as open-home attendance hits a four-year low.

The New Zealand property market is currently experiencing a violent collision between legacy valuations and new fiscal realities. For years, the market operated on a trajectory of perpetual growth, fueled by cheap credit and high migration. That engine has stalled. We are now seeing a liquidity trap where sellers remain anchored to previous peaks while buyers, squeezed by rising borrowing costs and employment uncertainty, simply stop showing up.

This disconnect creates a systemic risk for property developers and real estate firms. When “days to sell” blow out and inventory piles up, the pressure shifts from the buyer to the provider. To survive this volatility, firms are increasingly relying on digital marketing agencies to pivot their targeting strategies and find the dwindling pool of active buyers.

The Anatomy of a Market Correction

The data emerging from the field is bleak. Economist Tony Alexander’s latest surveys of real estate agents reveal that 44 percent of agents believe prices are currently falling in their respective areas. Here’s the worst reading since 2022. The sentiment is mirrored in physical activity; a net 51 percent of agents report a decline in open-home attendance, another low not seen since early 2022.

The psychology of the buyer has shifted from FOMO (fear of missing out) to a calculated fear of overpaying into a declining market. The primary drivers of this hesitation are threefold: rising interest rates, employment instability, and the palpable trend of falling house prices.

The window for sellers has slammed shut.

For those holding assets, the environment is reminiscent of 2021, but in reverse. While 2021 was characterized by a frenzy of demand that outstripped supply, the current phase is defined by a surplus of stock and a deficit of conviction. When buyers perceive a downward trend, they wait. This waiting game further suppresses prices, creating a feedback loop of devaluation.

Three Macro Shifts Redefining the Property Landscape

• The Supply-Demand Inversion: The market is being hit by a “perfect storm” of decent levels of new building completions combined with low immigration. Historically, high migration acted as a floor for house prices; without that constant influx of demand, the increased supply of new builds is actively pushing prices lower.
• The Interest Rate Squeeze: As mortgage rates rise, the serviceability of loans diminishes. This reduces the maximum bid a buyer can make, effectively lowering the ceiling for home valuations. The Reserve Bank of New Zealand (RBNZ) has noted that while the risk of a massive correction may not be elevated, rising rates are a primary catalyst for further price reductions.
• The Regional Divergence: We are seeing a fragmented market. While Auckland and Wellington are feeling the brunt of the downturn, regions like Southland and the West Coast are seeing asking prices skyrocket. This suggests that capital is rotating away from overpriced urban centers toward smaller, more affordable homes and regional hubs.

This fragmentation means a “national average” is now a useless metric for investors. Precision is the only way to maintain alpha in this environment.

The RBNZ and the “Sustainable Range”

The Reserve Bank’s most recent financial stability report provides the institutional framing for this slump. According to the RBNZ, house prices have remained broadly flat for the last three years, largely because a higher volume of houses for sale has acted as a natural brake on price growth. The central bank views current prices as being around the top of their “estimated sustainable range.”

From a macro perspective, Which means there is very little room for upward movement without a significant drop in interest rates or a massive spike in demand. For developers, this creates a precarious EBITDA margin. With construction costs remaining high and exit prices falling, the viability of new projects is under scrutiny. Many are now consulting commercial financing specialists to restructure debt and avoid insolvency as their projected returns evaporate.

“Days to sell have blown out, there’s loads of stock on the market, and rents are falling. This is most notable in Auckland and Wellington.”

David Cunningham’s observation regarding falling rents is particularly critical. In a healthy market, falling rents often precede falling house prices because they reduce the yield for investors, making the asset less attractive. When the rental income no longer covers the mortgage interest—a common scenario in a rising rate environment—investors are forced to sell, adding further supply to an already bloated market.

The Strategic Pivot for First-Home Buyers

While the outlook is grim for sellers and developers, the “gloomy” atmosphere is a strategic opening for first-home buyers. The shift in leverage is absolute. Buyers now have the luxury of time and choice, allowing them to negotiate from a position of strength.

However, the risk remains the “falling knife” scenario. Buying into a market that is still correcting requires a long-term horizon and a buffer for potential negative equity. For high-net-worth individuals looking to acquire distressed assets, the current climate necessitates rigorous due diligence and the involvement of corporate legal advisors to ensure clean title transfers and favorable terms during forced sales.

The current volatility is a reminder that real estate is not a guaranteed escalator of wealth, but a cyclical asset class. The “fuel shock” mentioned by ANZ economists previously served as a warning sign that the market was sensitive to external inflationary pressures. Now, that sensitivity has manifested as a broad-based cooling.

As we move into the next fiscal quarters, the focus will shift from whether prices will fall to how far they can drop before the RBNZ is forced to ease monetary policy. Until then, the market remains a battlefield of attrition. For businesses operating within this ecosystem, the priority is no longer growth, but resilience and liquidity management.

Navigating these headwinds requires more than just market intuition; it requires a network of vetted, professional partners who understand the nuances of a contracting economy. Whether you are restructuring a development portfolio or pivoting your sales strategy, the World Today News Directory provides direct access to the B2B firms capable of stabilizing your operations in a volatile market.