Iran war: NZ house prices could drop - is that bad?

Thursday, 2 April 2026

Two big banks are predicting house prices will fall - not grow - this year, but that does not automatically spell bad news for the market, commentators say.

Both ANZ and Westpac downgraded their price forecasts for the coming year due to the oil shock and uncertainty caused by the war in the Middle East.

In their latest Property Focus, ANZ’s economists said it had led to lower household confidence and upward pressure on mortgage rates and was weighing on a housing market already short on momentum.

They expected prices to decline 2% this year, and said a protracted conflict could see a steeper fall, while a resolution within the next month or two could see the market stabilise sooner.

Read more:

• Spectre of Middle East war hovers over residential development summit

• Why construction is one of the industries hit first and hardest in a fuel crisis

• Iran War: House price rise could be undermined by Middle East conflict

Westpac chief economist Kelly Eckhold now expected prices to fall by 1%, and said that a downturn in economic growth and a weaker labour market could lead to buyers stepping back from the market.

But will the forecast softening in house prices make a big difference to the market? Here’s what commentators told The Post.

Is a decline in house prices really that bad?

Simplicity chief economist Shamubeel Eaqub said how people interpreted a decline in house prices depended on whether they were an owner or wanting to be an owner.

But the market had been pretty stagnant of late, and people were used to that, so there was not likely to be a big impact from a 2% fall in prices, he said.

“Even a slight fall makes prices a little more affordable, but then banks are being careful about lending at the moment, so that counteracts it a bit.”

Cotality chief property economist Kelvin Davidson agreed price falls were good for aspiring buyers, with lower prices making a difference to affordability.

It was not cheap or easy to buy a house, but affordability had improved significantly as prices flatlined and interest rates dropped, he said.

“In 2022 to 2023, 60% of the average household income went on servicing the mortgage. That’s dropped back to close to 40% which is in line with the long-run average.

“Affordability was a big handbrake on the market for the last four to five years. That handbrake has now been released, and while the accelerator is not being pushed down, it’s much easier.”

But there is a flip side to price falls …

Price falls can act as a restraint on the housing market, as they tend to knock buyer and seller confidence.

Eaqub said confidence was already down due to the increase in fuel prices and uncertainty, judging by New Zealand and Australia data he received.

The question was did the decline in confidence or house prices come first, he said.

“In this case, it looks like confidence has been hit first. And that’s not surprising ‒ there’s a lot of uncertainty and fear in the world right now.”

Lower house prices could also impact on development equations, and affect the construction sector which was facing a two-fold hit, he said.

“That’s because it’s had a price shock as it is highly exposed to crude oil prices and petroleum is a component of so many materials. It is challenging for a sector struggling to recover from a prolonged downturn.”

For Bayleys head of insights and data Chris Farhi, a 2% move up or down would not “cause too much drama for the market”, but it would be worth watching sellers’ response.

In 2022 when there were big price falls many sellers hung on to their properties as their price expectations were based on the market peak in 2021, and the market stalled as they waited for prices to recover, he said.

“Now, the price falls being forecast are pretty marginal, so buyers and sellers probably won’t even notice them. But a more substantial fall could see that happen again.”

So what’s the longer-term outlook for the market?

Davidson said while softer prices were not great for sellers, sales were likely to continue their slow creep up this year, and there could be a little price growth.

A slight fall or rise either way in an already subdued market would not make much difference this year, he said.

“Over the longer term a period of flat, relatively stable prices is probably not a bad thing. We’re seeing a bit of a change in mindset around whether ever-rising prices are really that good for New Zealand and the economy.”

Going forward, there will be price growth again, but not the 30% growth seen in the Covid-era boom, he said.

“Price growth in the future is likely to be lower than in the past due to upward pressure on mortgage rates, debt-to-income ratios and the push to boost housing supply.”

Farhi said when there was a major geo-political conflict internationally there was often an increase in interest in New Zealand property from overseas.

“People tend to see New Zealand as a safe haven, and so with the exemptions for foreign buyers through the active investor plus scheme in place, we could actually see more activity in the higher end of the market.”

Even if prices do fall a bit, aren’t they still high?

While prices might be expected to not grow much this year, on a national level they remain well above pre-Covid levels, as new data from Quotable Value highlights.

In March the national average house price was $909,572, and that was 21.6% higher than it was in March six years ago, just before New Zealand went into lockdown, according to the latest QV House Price Index.

Of the main centres, Christchurch’s average house price of $798,518 was now 55% higher than it was six years ago, and Auckland’s average of $1.19 million was 9.6% above its March 2020 level, despite a big decline from its market peak.

But Wellington’s average of $907,767 was now 0.2% less than it was at the end of March 2020.