The five things you need to know about the housing market this week.
1. The affordability handbrake is off, but we’re not on the accelerator either
The latest Cotality Housing Affordability Report shows continued improvements in the market for first-time buyers: house prices remain subdued, mortgage rates are fairly stable, and incomes are creeping higher. Indeed, typical new mortgage payments as a share of median household income were 42% in the final three months of last year, bang in line with the historical average since 2004. In other words, housing still isn’t cheap, but it’s more affordable than it’s been for several years.
That said, renting is still a challenge, especially if the household earns a below-average income yet still has to pay a typical rent. Saving a deposit while also having to pay relatively high rents seems to be the main challenge at present (albeit the high LVR lending allowances at the banks are a help on that front).
Start your property search
To use a car analogy, stretched affordability is no longer the handbrake on house prices that it’s been in recent years, but it doesn’t suddenly mean we’re going to floor the accelerator either. Perhaps a shift into first gear is more likely in 2026.
2. The two-year fix is back in vogue
Floating rates are no longer all the rage. Reserve Bank figures show that just 19% of loans were on floating rates in January, the lowest share since August 2024, while there were only 26% of loans fixed for six or 12 months.
By contrast, the share fixing for longer than a year surged up to 55%, the highest since January 2023. Although still a small share of activity (5%), five-year fixes are more popular than they’ve been since mid-2021, while three-year terms have also increased significantly. But the most popular individual term has become the two-year fix, with 28% of activity in January.
Cotality chief economist Kelvin Davidson: "In an environment where the chances of a mortgage rate rise this year are growing, it makes sense to lock in for a longer period." Photo / Peter Meecham
In an environment where the chances of a mortgage rate rise this year are growing, it makes sense to lock in for a longer period, and the two-year rate seemingly offers a good blend of attractive pricing but also some degree of certainty (as well as better flexibility than a five-year loan).
3. Good news for manufacturing
It was another good result from the BNZ-BusinessNZ Performance of Manufacturing Index in February, with the 12th rise in activity in the past 14 months. It’s not necessarily a game-changer (the sector accounts for perhaps 8-9% of NZ GDP), but it’s still very handy to have growth. In turn, this might help with job creation and support property sales activity.
4. The migration worm certainly seems to be turning
A strong month for arrivals to NZ in January (driven by new migrants rather than returning Kiwis) saw the net migration balance rise again, and it now sits at 23,200 in the past 12 months – the highest since December 2024, albeit still below the long-term average of around 31,000. This fits with the perception that our economy and labour market is improving, even if the data isn’t all in the same direction each month. Landlords will be pleased, although with rents already high in relation to household incomes, a continued soft patch for rental growth seems more likely than a sudden burst of life.
5. GDP figures well out of date
Stats NZ’s Q4 GDP figures are out on Thursday this week and most estimates for this benchmark economic indicator are that we’ll see a rise of around 0.5%, not amazing, but not bad either. That said, the figures are always lagging and given the global events of the past 1-2 weeks they’re probably even more dated than normal. Thursday’s figures will still be closely analysed, but I’m not sure they’ll have much effect on current economic sentiment or expectations for how the Reserve Bank might act in the coming weeks and months.
- Kelvin Davidson is chief economist at property insights firm Cotality
