Watch JB's latest NZ property market update below, or keep scrolling to read the full article:
And just like that, we’re back with our first market update of 2026.
Here’s the latest on what’s been happening across interest rates, the NZ property market, and wider economy in recent weeks.
What’s happening with the OCR and interest rates?
Despite inflation threatening to throw a bit of a spanner in the works, our first Official Cash Rate (OCR) announcement of the year, on 18 February, was a positive one for borrowers.
In addition to holding the OCR steady at 2.25%, which was widely expected, the Reserve Bank (RBNZ) also doubled down on the fact that it’s not planning to start hiking interest rates any time soon.
Its updated rate outlook has the OCR staying flat for most of the year, with our first (0.25%) increase likely in the pipeline for either late 2026, or early 2027, depending on how the data plays out.
The doveish-ness of its statement came as a surprise to the market, which, in recent weeks—off the back of a higher-than-expected inflation result for the December 2025 quarter (at 3.1%)—had started to price aggressive increases in from as early as mid-year, sending wholesale rates climbing.
(The logic was flawed, given the key drivers of that inflation figure were high council rates and utility bills i.e. the sorts of things interest rates make very little difference to.)
At this stage the RBNZ is still confident that core inflation is under control and is expecting it to track back to the mid-point of its 1-3% target range over the next 12 months.
The last thing it wants, with the economy just starting to make its slow recovery, is to harpoon things by hiking rates needlessly or too soon. So, it needed to send a clear message to the market: don’t get ahead of yourselves.
Wholesale rates have fallen slightly off the back of the verdict—creating room for fixed-term mortgage rates to come a little bit down as well.
A number of the banks have now cut their three- to five-year fixed term rates, with subset of those dropping 18-month and two-year fixed rates slightly as well. The best one-year rate on offer is unchanged at 4.49%.
From here, wholesale rates are expected to remain relatively stable over the course of this year.
How’s the New Zealand economy tracking?
Admittedly, there’s still a fair bit going on out there that doesn’t feel super positive.
Unemployment’s tracking higher than we’d like. Company insolvency numbers in the December 2025 quarter were the second highest we’ve seen in 25 years—behind Q4 2008 (right at the height of the GFC).
There’s probably a bit more hurt to flow through, although I’d argue that’s less a reflection of where we’re at now, and more a reflection of just how tough the last few years have been.
The good news is that there are also definite signs of recovery out there—the big one being that business confidence is on the improve.
Business owners are starting to feel a bit more optimistic about what the next few years have in store, and to think about investing in the future again. Eventually that’ll filter through to job creation, which in turn will filter through to greater consumer confidence.
We’re not quite there yet—and it’s going to be a slow process, especially with all the uncertainty of an election year ahead—but the foundations are being laid.
The big unknown for New Zealand really lies in what’s happening overseas
There are a lot of big economic and political forces playing out around the world at the moment, with the US at the heart of most of them.
Economically speaking:
- We’ve got a weakening US dollar right now—it’s down against all major currencies. That’s largely thanks to global markets starting to get spooked by the Trump administration’s policies on global tariffs and federal debt and dialing back exposure to US investment. If it translates through to an inflation problem on US shores, that will have flow-on effects for the rest of the world.
- The US government has been running huge deficits for more than 20 years and the problem only seems to be accelerating—now totaling almost USD$39 trillion. It doesn’t really bear thinking about, but the possibility of a US government default doesn’t feel the distant possibility it once was.
Geopolitically speaking:
- Tensions between the US and Middle East have escalated massively in recent weeks—to the point where a US invasion of Iran now feels imminent. There are people out there far smarter than I am who think it’s all part of a bigger strategy (along with the US strikes on Venezuela last month) to interrupt the black-market oil trade, and the various regimes it supports—including Cuba and Russia.
- US-China relations are also a bit of an unknown, in that they have this weird frenemy-esque relationship—at each other’s throats over some things, willing to cooperate on others. So, it’ll be interesting to see how that plays out over the coming months and years.
As a final note, Russia’s got some big problems of its own. Trade sanctions are biting—and the Russian economy is looking more perilous. In some ways, it’s a miracle it’s soldiered on as long as it has, given that its GDP is now so heavily skewed to its war machine.
Fingers crossed it doesn’t happen—but even if there was some sort of major correction driven by offshore forces, my sense is that the impact for New Zealand wouldn’t be cataclysmic
The benefit of having an economy built largely on things like agriculture and horticulture is that—while it’s not sexy, and it’s not high-growth—it does make us resilient. At the end of day people need to eat.
To use an analogy, it’s like the story of the tortoise and the hare.
Everyone wants to be the hare—one of these exciting, crazy, fast-growing economies—but when the global outlook feels a bit shaky and uncertain, there's actually nothing wrong with being the tortoise.
New Zealand will just be here, plodding along on our slow and steady recovery.
What’s happening out in the housing market?
The answer to that really depends on which part of the equation you’re talking about.
On the one hand, turnover has picked up.
People who had put their lives on hold amidst the chaos of the last few years are starting to jump back in and get on with things, and—although it’s taken a period of adjustment—vendors are letting go of their over-inflated ideas of what their houses are worth, and are much more willing to meet the market.
That’s meant we’ve got a bit more balance back in the supply-demand equation, and the high levels of surplus stock that have characterised the market over the last little while are starting to dissipate.
House prices though, are still running flat—and (if we look at the big picture) probably still falling slightly.
And there’s not a lot in the pipeline that’s going to change that.
We’ve got a government hellbent on increasing land and housing supply (including with changes to the Resource Management Act) and parallel importing of building materials that’s helping to keep the cost of new builds in check.
Moving forward, it’s reasonable to expect house price growth to keep track with general inflation—somewhere in the realm of 2-3% per year, maybe 4%.
The days of house prices doubling every 10 years or so are behind us. And to be honest, that’s a good thing.
Of course, there will always be nuances across different parts of the market. Auckland and Wellington are still struggling to get any sort of momentum, while parts of the South Island (specifically Christchurch and Queenstown) are performing well.
But all up, I think we’re in for a reasonably stable housing market over the next cycle.
About the author: John Bolton (JB), Squirrel Founder & Group Head of Property Finance