Experts Advise Caution Despite Improved Sentiment
The latest housing confidence survey from ASB Bank indicates that while expectations have improved across most regions, structural supply levels and interest rate uncertainty will constrain momentum through 2026.
House price growth is expected to remain muted this year. Elevated inventory levels and moderate demand are forecast to limit upward pressure on values. This suggests a market transitioning from contraction to stabilisation, rather than entering a new expansion cycle.
ASB chief economist Nick Tuffley noted that confidence appears to have moved beyond its weakest phase following softness in 2025. House price expectations have rebounded, but the underlying fundamentals do not point to a sharp upswing. Supply remains near decade highs, creating competitive conditions that cap pricing power for vendors.
Regional sentiment data underscores the improvement in outlook. The South Island is leading optimism, with a significant net proportion of respondents expecting prices to rise over the next year. Auckland recorded the largest quarterly increase in confidence, reflecting stabilising conditions in the country’s largest metropolitan market.
Inflation at the end of 2025 was above the Reserve Bank of New Zealand’s target band, and mortgage rates have begun edging higher. Survey results indicate a shift in expectations, with fewer respondents anticipating falling rates. This shift may influence refinancing activity, credit demand and loan structuring decisions.
Prices are broadly stable, supply is abundant, and mortgage rates remain historically moderate. These factors create favourable negotiating conditions compared with markets seen during the pandemic period. However, the expectation of rising rates and modest price growth could accelerate purchasing decisions among households concerned about affordability erosion.
Subdued price growth may limit margin expansion, particularly if input costs remain elevated. High stock levels also suggest that new project launches will require disciplined feasibility assessments and targeted product positioning.
For financial services professionals, the environment calls for balanced risk management. While improving sentiment supports transaction volumes and lending activity, the absence of strong capital gains reduces the speculative element that often fuels rapid market cycles.
Overall, the housing market appears to be entering a period of steady recalibration. Confidence is improving, but with supply abundant and interest rate expectations shifting upward, price growth is likely to remain contained. Strategic planning in 2026 will require careful monitoring of inventory trends, credit conditions and regional demand patterns.
