Five ways the Middle East conflict could impact NZ's housing market

Wednesday, 18 March 2026

The war in the Middle East could prove a bit of a dampener for New Zealand’s housing market.

New Zealand’s housing market is a long way from the Middle East, but the war in the region will mean another headwind for the already subdued market, experts say.

The conflict between the US-Israel and Iran is now in its third week, and has seen the closure of the Strait of Hormuz, an important global shipping route.

That’s impacting on the supply of oil, and has led to a surge in the costs of fuel, along with widespread fears about inflation and the global economy.

But the million dollar question is how long the crisis might go on for because that will determine the impact on New Zealand’s economy - and its housing market.

Here’s what the conflict in the Middle East could mean for the housing market.

1. Cost of living pressures

Simplicity chief economist Shamubeel Eaqub said if the situation goes on for a few months, higher fuel costs will start to have a big impact on the cost of living and necessities.

That extends into second tier products, and leads to higher inflation, eroding purchasing power, and slowing down the economy, he said.

“At the margins there’s a climate of fear. And already we are seeing people driving less, doing less, spending less. At my local coffee shop, people are buying fewer coffees, eating out less.

“If it goes on for a long time it could lead to stagflation which would be horrific for the economy.”

Cotality chief property economist Kelvin Davidson said higher costs and a weaker economy, particularly if it increased labour market insecurity, would dampen housing market activity.

2. Higher borrowing costs

If inflation went up, it also increased the risk of upward pressure on mortgage rates, Davidson said.

“The Reserve Bank has a mid-term inflation target and can look past temporary spikes, so the odds of a kneejerk OCR move are low.

“It may need to lift the OCR a bit if inflation continues, and that makes for higher interest rates, higher borrowing costs, and a slower housing market.”

He had not seen banks raising mortgage rates yet, but wholesale rates had gone up, and banks could react, leading to a borrowing cost increase even if the Reserve Bank did not move, he added.

3. Reduced buyer confidence

It is market confidence that is set to take a hit from the Middle East conflict first.

Eaqub said there was always a dent to home buyer confidence and demand when there was a bit more uncertainty and fear.

“Caution is a hallmark of the current market anyway. Look at the days to sell figure - houses are just hanging around. Look at the high amount of stock on the market.”

It would increase the demand challenge, and act as a dampener on sales and prices, he said.

“The market has been showing signs of improvement, with sales and new listings ticking up a bit, mortgage lending picking up, things starting to move. So this shock comes at a really bad time.”

Auckland property developer David Whitburn said reduced buyer confidence was likely to result in fewer people going through open homes, and some buyers deciding to delay purchases or negotiate harder.

It was unlikely to lead to widespread price falls, he said. “But I think we’ll see more banks easing back their price growth forecasts for the coming year.”

4. Increased building costs

Whitburn said higher fuel and shipping costs would also put pressure on building costs, and he had already had a letter from a major supplier about a price rise in April.

Building materials such as aluminium, glass, and fixtures and fittings would see the impact of freight cost increases, while cement, steel and brick products required high fuel use, he said.

“It’s a bit of a concern. We could see increases of 2% to 4% in various products from a mild shock. That’s manageable, but any higher would be horrible.”

Higher building costs would make the new build process more expensive and less appealing than buying an existing home, and could slow down the sector, he added.

5. Market recovery on hold for longer

For ASB senior economist Chris Tennent-Brown, the backdrop to the Middle East conflict was an already weak housing market, with lots of supply relative to buyers.

Financial markets were not pricing any more interest rate cuts in, with the next OCR move set to be up, and the risks of the conflict added another headwind to the mix, he said.

“The million dollar question is how long the war lasts. If it's a long drawn out war we could see a significant chunk of global growth get taken off, and that could impact on our exports and trade, and economy.”

There were a lot of unknowns at play, but the situation would not be a game-changer for the housing market, although it might slow any recovery, he said.

“But that doesn’t mean people should stop planned home buying or selling. They need to think about their own long-term goals and situations at a time like this.

“There are lots of homes for sale, and it's still a reasonable market for buyers.”