Foreign buyers won't save the housing market, so what will?

1. It’s been a chilly Winter for property values

The Cotality Home Value Index showed a 0.2% fall in New Zealand's median property value in August – a small decline, but the fifth drop in a row. The gains that had previously emerged over the final few months of 2024 and the first few months of this year have now been reversed. Auckland remained subdued in August, dropping by 0.5%, with Wellington and Hamilton only edging down by 0.1% apiece. Tauranga was flat, while Christchurch and Dunedin were up by 0.2% and 0.4% respectively. Nelson, New Plymouth, and Invercargill also saw value lifts last month.

Taking a step back from the minutiae of monthly changes, the bigger picture is that winter has been another sluggish phase for property values, with market confidence levels patchy and the weak economy and labour market still key restraints.

To be fair, property sales are rising and starting to bring down the stock of listings on the market, while more existing borrowers will roll off higher, older mortgage rates and down to current levels as the next few months pass. This is probably setting the scene for a rise in property values in 2026, but with DTIs now in action, a fresh boom seems unlikely.

2. Foreign buyers make a return

The other significant news last week was the Government's change to Active Investor Plus visa to allow foreigners to buy or build one dwelling in NZ with a value of at least $5m. Our figures show there are around 7000 of these properties nationally, with 4300 in Auckland and 1250 in Queenstown (and not much elsewhere).

It’s unlikely this will transform our housing market. After all, those 7000 dwellings only equate to 0.4% of stock, and, of course, they also need to be listed for sale in the first place. Once you account for all that, you're looking at maybe 200-300 extra transactions a year, and only in upper-end areas. Yes, there might be a price effect in those fancy suburbs, but elsewhere the rule change will be largely irrelevant.

Cotality chief economist Kelvin Davidson: "Property sales are rising and starting to bring down the stock of listings on the market." Photo / Peter Meecham

3. Dwelling consents aren’t rising, but not falling either

Another reason to be cautious about the speed and size of any house price upturn in 2026 is that we should still have a reasonable level of construction coming through. Not a glut, but still more than in past low points of the cycle. Indeed, although Stats NZ reported last week that the number of new dwellings consented in July was 3% lower than the same month last year, the annual running total still held in its tight range of 33,500 to 34,000 – where it’s been for about 14 months now, and a far higher level than in past troughs.

4. More weakness for net migration?

On Wednesday, Stats NZ will publish July’s migration figures. With new arrivals dropping, and departures (especially young Kiwis) remaining high, net migration figures have been trending downward, although the rate of decline has slowed in recent months. July's number is likely to be on trend, and a key reason why property rents remain sluggish.

5. Hoping for better economic news

Friday will see the August updates for manufacturing and retail. I guess we all have to hope that the upturn starts soon! There were hints of improvement in July, so a continuation in August would be welcome news.

- Kelvin Davidson is chief economist at property insights firm Cotality