'Bargain' cities: The shrinking cost of getting a bigger house

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

1. It’s arguably a good time to trade up

Last week, Cotality released its annual look at the gap in median values between three bedroom and four-bedroom houses. The gap is a proxy for what it costs in debt or equity (or both) to trade up, albeit acknowledging that some people will view a trade-up differently, preferring a better suburb or a newer property, rather than more bedrooms. That issue aside, the latest data shows that it still costs a lot in most areas to get that extra bedroom – at least $100,000 in almost all parts of New Zealand, and more than $400,000 in Auckland City, Manukau, North Shore, and Queenstown.

Even so, some key markets, including parts of Auckland and Wellington, have recently seen the trade-up premium get smaller, perhaps as four-bedroom property values have dropped more than three-bedroom property values (although in other areas the trade-up premium has shrunk because three bedrooms have risen more than four, which is a less favourable set of shifts for buyers).

Long story short, although relocating owner-occupiers are generally pretty cautious at the moment, it’s probably a pretty good time to be considering a move up the ladder. Listings are abundant, and although that might subdue your own selling price, the closing trade-up gaps on our data show that you may also get an even better deal on the property you buy.

2. A good GDP result for Q1, but the world has changed

Part of the reason why movers aren’t moving as often as normal is simply the uncertain economic outlook and reduced job security. On that front, though, at least the Q1 GDP figures were solid, showing a 0.8% economic expansion compared to the final three months of 2025. But we should probably all move on fairly quickly, given that the world has changed a lot since March. The Q1 GDP figures won’t tend to have major implications for the Reserve Bank’s thinking either, with their focus firmly on what might lie ahead for inflation.

Cotality chief economist Kelvin Davidson: "Clearly, a reduced likelihood of further mortgage rate increases would point to some upside for property sales activity." Photo / Peter Meecham

3. Fingers crossed on US-Iran deal

At least the near-term economic outlook from here on is looking brighter off the back of the recent US-Iran peace deal, if it lasts. Assuming it does hold and that the "oil can flow again", there’s now a greater chance that inflation pressures will recede more quickly (albeit not straightaway) and that interest rates may not need to rise as soon or as far.

Has the deal ruled out a July OCR increase from the Reserve Bank? Perhaps not altogether. But there’s now also a strengthening case for waiting until September, given some evidence that inflation isn’t spiking as high as might have been anticipated in the meantime (more below). Clearly, a reduced likelihood of further mortgage rate increases would point to some upside for property sales activity and house prices into the second half of 2026, but a fresh boom is unlikely.

4. Monthly inflation indicators weren’t as bad as feared

Last week’s selected price indexes data from Stats NZ for May (a monthly proxy for the quarterly, benchmark CPI) tended to undershoot analysts’ expectations and indeed forecasts for Q2 CPI inflation have been downgraded from as high as 4.5% to closer to 4% (which, of course, is still not great). Many businesses still face input cost pressures, but households’ caution means firms may be battling to raise their selling prices, which is potentially limiting inflation to a lower rate than otherwise might have prevailed. Good news for mortgage-holders!

5. Another cooler result for mortgage lending?

Just quickly to finish for this week, the Reserve Bank’s mortgage lending figures for May will be published on Thursday. There was a slowdown in April’s lending figures, and May’s data could show more of the same. As always, the splits by loan-to-value ratio and debt-to-income ratio will be intriguing, as well as the figures on bank switching/refinancing. That being said, I’d expect the latest lending figures to look pretty normal, without too many big swings on any of the breakdowns.

- Kelvin Davidson is chief economist at property insights firm Cotality