New Zealand national house prices remain about 15% below their late 2021 peaks and roughly 30% lower after adjusting for inflation, with ASB expecting a moderate, income-led recovery that is unlikely to see nominal peaks until late 2029, according to a Thursday report by ASB.
"While affordability has improved, the market just hasn't taken off," says ASB Senior Economist Mark Smith.
"Buyers have more time and choice than they did during the last upswing, while sellers may need to keep expectations realistic. We aren't forecasting a return to the rapid capital gains of the past decade," Smith added.
ASB expects national house prices to be broadly unchanged over the year, rising about 3.5% in 2027 before growing more in line with household incomes.
The outlook differs by region as Auckland and Wellington have seen larger falls since the peak while Christchurch has been more resilient, helped by a stronger regional economy and internal migration, ASB added.
Smith said an income-led upswing might reduce the risk of economic overheating and support a more balanced expansion, potentially allowing for a more gradual monetary policy tightening by the Reserve Bank of New Zealand.
However, an upside surprise in the housing market may lead to the official cash rate moving above ASB's current 3.25% peak view in 2027.