It’s no secret that our housing market is experiencing a sluggish recovery, with prices increasing at a much slower pace than expected. Market uncertainty, subdued confidence, and an oversupply of property listings are dampening momentum, despite demographics pointing to a strong underlying demand. Many buyers are waiting for clearer economic signals before making a move, with first home buyers feeling the pinch as our KiwiSaver balances bounce around due to Trump’s tariffs.

The latest data from REINZ revealed that house prices continue to largely track sideways, a trend that has been continuing nearly two years. Economists have also been revising their house price growth expectations down, with ANZ economists reducing their expectations for growth during 2025 to 4.5% - down from 7%.

On the flipside, national sales counts increased by 9.5% in April - from 5,871 to 6,427 compared to the same period last year. That coupled with another recent cut to the official cash rate should hopefully all aid in helping to clear through the continued oversupply and backlog of listings.

So how long will that take, and when are we likely to see prices start to edge up?

Bayleys Head of Insights and Data Chris Farhi says property listings have been building up over the past two years and it’s taking a while to catch up.

“At the moment it's very high compared to historic levels, and that creates a lot of distraction for buyers and less urgency for them to purchase because they believe they’ll easily find something else if they miss out on a home.”

“Another element that’s slowing things down is vendor expectations. We always expect vendors to have slightly higher expectations than buyers, but at the moment, for some vendors the gap is too big for them to reach an agreement.”

Even with falling interest rates Farhi says Bayleys’ March sentiment survey revealed this gap continues, with many buyers still unwilling to increase their offers by much.

“What's happened is that we've only seen a little bit of a boost from buyers. Just 6% of our agents are reporting that buyers were prepared to pay more, but at the same time we've seen a much larger proportion of our agents reporting that vendor price expectations have increased.”

Ultimately it means that vendors have become more confident than buyers, which Farhi says is problematic when it comes to striking a deal.

“It's increasing the risk of a persistent gap in price expectations, where everything shifts up as opposed to helping things to tighten.”

“As a result, the house price trend has been moving sideways and for longer than expected. Late last year, we would have said it will take a couple of months for reductions in interest rates to track into the market data, but we're a solid six months since the first OCR reduction last year, and we haven't seen any real pressure on prices. “

WHAT ELSE ARE BAYLEYS AGENTS SEEING?

The latest sentiment survey found the biggest challenges facing vendors are price expectations, frustration at the slow market and a reluctance to invest in marketing.

70% of agents report that market conditions were neutral, neither weak or strong, with 68% saying that house prices aren’t changing.

Relocators and first home buyers were tied equal for the most active in the market, but that data was gathered before KiwiSaver balances took a dive after Trump’s tariffs were introduced.

The biggest challenges facing buyers are too much choice reducing the urgency to buy, a fear of overpaying for a property and the availability to finance.

Since the OCR was cut just under half of Bayleys agents say they’ve had more enquiries from potential buyers, with 13% saying that’s translated to more offers.

WHY AREN’T PEOPLE WILLING TO PAY MORE?

So interest rates are coming down, surely that means people have more money to play with? While that might usually be the case, things get complicated when there’s increased economic uncertainty, a decrease in buyer confidence and a rise in the cost of living.

“The nature of the commentary surrounding the economy isn’t that rosy, and that would be softening confidence.”

But Farhi says it isn’t as if prices aren’t moving at all and believes that smaller increments have been making less impact following on from covid.

“We had a really volatile period with a huge interest rate drop, followed by a huge hike whereas now it feels like we're getting into more of a normal marketplace.”

“We saw prices move up 4% in the second half of 2023, but that barely raised an eyebrow. I think as a society that perhaps we’ve become desensitised due to the huge rises during the COVID era, and will only take notice of big increases like 10% - but that’s a huge number, and isn’t normal.”

“Right now we’re not seeing huge growth, but that actually makes for a great market to both buy and sell in. It means that you can sell and then buy a couple of months later without too much concern about the market changing too much.”

“I think that's really positive for both parties as it gives you a bit more certainty around your plans especially after you sell your property.”

WHEN WILL THE BACKLOG OF LISTINGS CLEAR?

Farhi expects it’ll likely take between 6 - 12 months to clear the backlog of listings and return stock levels to normal.

“At the end of April there were 36,000 homes for sale. During normal market conditions we might see around 27,000, so we’re seeing almost 10,000 more than normal.”

“The market might see around 6000 sales in a typical month, so you'd need to have say a full year of elevated sales to pull that number down, unless there were also some vendors taking their homes off market and waiting it out.”

Farhi says the good news is that both agents and brokers are picking the market to strengthen in the coming months.

67% of brokers say market conditions are getting stronger, while 37% of agents say the same.