Economists say house price growth in 2026 is likely to stay muted. Would that be such a bad thing, writes Catherine McGregor in today\u2019s extract from The Bulletin.<\/p>\n
To receive The Bulletin in full each weekday,\u00a0sign up here<\/a>.<\/p>\n Fixed rates near the bottom of the cycle<\/b><\/p>\n The Reserve Bank\u2019s 25-basis-point cut this week \u2013 taking the OCR to 2.25% \u2013 immediately flowed through to floating and flexible home loan rates. But for fixed-term borrowers, the effect is more muted. Markets had fully priced in the move, and economists now believe the downtrend in mortgage rates is close to bottoming out. Swap rates even lifted slightly after the announcement, signalling limited room for further drops unless the economic outlook worsens.<\/p>\n BNZ chief economist Mike Jones\u00a0told RNZ<\/a> the downtrend in fixed rates \u201cwas on its last legs anyway\u201d, with the Reserve Bank\u2019s shift toward a more neutral stance reducing the chances of further significant falls. Longer fixes, such as five-year rates, may already be at or near their lowest. Analysts from Kiwibank, Infometrics and ANZ expect the next phase of the rate cycle to be stability rather than continued declines, with gentle increases possible from mid-2026.<\/p>\n Supply glut limits impact on house prices<\/b><\/p>\n The OCR cut is expected to ease mortgage pressure but not to drive any near-term increase in house prices. A surge in new listings through October and November pushed total stock back towards its peak level for the year, giving buyers more choice and reducing urgency.\u00a0In commentary republished in Newsroom<\/a>, BNZ\u2019s Jones said new listings growth \u201ccontinues to nullify any pressure on house prices to rise and is in contrast to expectations the inventory overhang would be worked off this year\u201d.<\/p>\n Nationally, prices remain nearly flat, with slight monthly fluctuations but no consistent momentum. Looking to 2026, most forecasters, including the Reserve Bank, expect modest growth of around 4%. The reasons for an increase, however small, include a small recovery in population growth, mortgage rates staying low, and the broader economy slowly regaining traction. However, as in the last few months, high numbers of listings are expected to keep price rises contained.<\/p>\n Should we want higher prices?<\/b><\/p>\n Forecasts for price increases are often treated as a positive, with this week\u2019s story on the NZ house market\u00a0by Reuters\u2019 Lucy Craymer<\/a>\u00a0finding deep anxiety about the end of automatic capital gains. After the boom-and-bust cycle of the past few years \u2013 including a 40% Covid-era surge followed by falls of up to 30% in some cities \u2013 the downturn has \u201chad a chilling effect on consumption and the economy\u201d, Craymer reports. With more than half of New Zealand\u2019s household wealth tied up in property, that shift in sentiment has been powerful, she wrote.<\/p>\n But there is increasing pushback against the assumption that rising prices stimulate the economy.\u00a0The NZ Herald\u2019s Liam Dann<\/a>\u00a0(paywalled) recently highlighted Motu research showing that most households actually spend less when property prices rise, as mortgages or rents grow alongside them. Only outright owners tend to spend more. As Dann wrote, \u201cLocally, at least, the Motu data effectively negates the last remaining argument for a housing market boom, even as a short-term economic panacea.\u201d<\/p>\n Pushing back against the \u2018wealth effect\u2019\u00a0<\/b><\/p>\n