Diverging Trends Shape New Zealand’s Housing Market Landscape

New Zealand’s housing market is increasingly characterized by contrasting trends in its North and South Islands. According to data from the Real Estate Institute released on March 4, 2025, the national median house prices rose by 0.4 percent since January, reaching a median of $753,106. Excluding Auckland, median prices saw a more significant increase of 1.4 percent, totaling $700,000.

The disparities within the market highlight a notable divide. While Auckland and Wellington continue to face declining prices—down 23.6 percent and 26.9 percent respectively from their post-COVID peaks—the South Island is experiencing a surge. The West Coast achieved a record high median price of $480,000, marking a 9.3 percent increase year-on-year. Other regions in the South Island also posted positive growth, with Southland up 5.7 percent, Otago up 6.7 percent, and Canterbury up 3.4 percent.

In contrast, the North Island has shown more limited gains. Only Waikato, Hawkes Bay, and Auckland recorded price increases in January compared to the previous year, with respective rises of 1.4 percent, 2.4 percent, and 1.1 percent. Analysis of the house price index reveals that Auckland prices have decreased by 1 percent annually over the past five years, while Wellington’s prices have dropped by 3 percent. Conversely, Christchurch has seen an annual increase of 5.4 percent, with Queenstown and Invercargill also experiencing notable growth at 8.1 percent and 5.2 percent respectively.

Mike Jones, chief economist at BNZ, described the situation as a “tale of two islands,” emphasizing the contrasting market conditions. He noted that the North Island is operating at a significantly different pace compared to the South Island, making it challenging to discuss New Zealand’s housing market as a single entity. Jones pointed out a trend of migration towards the South Island, fueled by increased rural and regional incomes and affordability factors.

“The markets in the South Island, particularly, are cheaper relative to incomes and rents compared to Auckland and Wellington,” Jones stated. He predicts that this divergence will continue as more people relocate southward, and regional economies demonstrate stronger performance.

Since the national correction in house prices ended in April 2023, Auckland has witnessed an additional decline of 1.4 percent, while Wellington has experienced a further drop of 3.2 percent. In stark contrast, house prices in Canterbury, Otago, and Southland have surged by 17 percent and 20 percent respectively during the same period. This indicates a significant divergence in market trends across the country.

The supply dynamics also play a crucial role, particularly in Auckland, where increased construction has led to a more competitive market. Jones noted that Auckland and Wellington are oversupplied, with construction activity beginning to pick up again despite low population growth.

Property investment coach Steve Goodey expressed concerns about the lack of yield for investors in Auckland. He advised clients to avoid the city if they are seeking cash flow, noting that while discounts are available, they do not translate into substantial yields. Goodey has focused his investments in smaller towns like Invercargill, Whanganui, and Hawera, citing the potential for capital gains over time.

Looking ahead, Kelvin Davidson, chief property economist at Cotality, indicated that sales activity outside the main centres is growing at a faster pace. He suggested that Auckland and Wellington may lag behind in the near future. “We are projecting a national average rise of 5 percent this year, although it is possible that Auckland and Wellington will see lower increases, while some second-tier cities may perform better,” Davidson commented.

As the housing market continues to evolve, the contrasting fortunes of the North and South Islands underscore the need for potential buyers and investors to carefully consider regional differences and market dynamics.