Market on a knife-edge: What falling sales and a jump to 4% inflation could mean

The five things you need to know about the housing market this week.

1. Inflation to hit the headlines again

The key economic release this week will be the consumers price index for Q1 2026 from Stats NZ on Tuesday. After Q4 2025’s result of 3.1% (slightly above the 1-3% target band), there’s every chance we’ll get another concerning inflation result for Q1 too, especially with fuel prices up sharply in March. Of course, the Reserve Bank won’t be too worried about that, as it has already signalled its intent to “look through” the first-round inflation effects of higher fuel prices. But from here on, it’s going to get trickier, with headline inflation possibly set to go above 4% in Q2 (the quarter we’re in now) and the RBNZ vigilant to possible “second-round” inflation impacts, such as broader price pressures in the economy, higher wage demands and raised inflation expectations.

2. How fast is the economy slowing?

We’ll also get the March NZ Activity Index from Stats NZ on Thursday this week, and it looks almost certain to have slowed, given we’ve already seen business and consumer confidence drop, and measures of manufacturing and services activity ease too. It’ll be an unwelcome development for the Reserve Bank as it tries to navigate rising inflation pressures and downside risks to GDP.

3. Another sluggish month for house sales in March

Measured across estate agents and private deals, there were about 8900 property sales in March, roughly 2% below the same month in 2025. That’s not a big drop, but nevertheless the third fall in a row after drops of 8% in January and 3% in February. In other words, it’s been a sluggish start to the year for the market, but also, stock remains at elevated levels, and buyers still have quite a bit of pricing power. On top of that, given that some of the lags have now had time to start working their way through the system into confidence, mortgage rates, and house-buying decisions, it wouldn’t be a surprise to see more soft results for sales activity in the next few months.

4. First-home buyers remain strong, investors middling, movers cautious

Saying that, first-time buyers accounted for 27.5% of residential property purchases in the first three months of 2026, very close to the record high of 28.2%, set in Q4 last year. The latest Cotality figures highlight first-time buyers’ dominance across much of the country, as they capitalise on sluggish house prices, reduced mortgage rates (for now), and the ability to get in without a 20% deposit.

Cotality chief economist Kelvin Davidson says first-time buyers are capitalising "on sluggish house prices, reduced mortgage rates (for now), and the ability to get in without a 20% deposit". Photo / Peter Meecham

For mortgaged multiple property owners, MPOs – including the cliched “Mum and Dad” investors – the story is a little more nuanced. Yes, they’ve been buying since mortgage rates dropped and tax rules eased, with their market share around 24-25%. But there are challenges too, such as weak rents, high home insurance and council rates bills, and some longer-term considerations in the form of potential tax changes (e.g. capital gains tax) and the possibility of less price growth in future. Certainly, there are anecdotes of more experienced, existing investors looking to reduce their portfolios.

And finally, relocating owner-occupiers – aka movers – remain quieter than normal. Consumer confidence and the economy play a key role in their choice of whether to move or not, so the long-awaited comeback by this group may be delayed again by the conflict in the Middle East.

5. Could migration continue to rise?

Turning to one of NZ’s key macro indicators, the latest Stats NZ figures showed the strongest monthly net migration flow for around two years in February (seasonally adjusted roughly 4000), with the 12-month running total lifting to nearly 25,200, the highest since November 2024. This has come about due to both rising arrivals and falling departures – and will certainly be music to the ears of some property investors who might be hoping for stronger tenant demand.

Of course, like a lot of incoming data at present, there’s now a line in the sand, and migration flows over March and onwards may look a bit different. That being said, who knows, NZ may benefit, as uncertainty potentially keeps more current residents here and brings in more new migrants looking for relative safety. One to watch for sure.

- Kelvin Davidson is chief economist at property insights firm Cotality