Can the NZ economy grow while house prices stagnate?

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The question of whether the New Zealand economy can grow much without a recovery in the housing market remains a live issue.

Thursday, July 9th 2026, 10:13AM

by Jenny Ruth

The latest data from the Real Estate Institute showed its house price index in May was down 16.2% from the peak in late 2021 and that prices have continued to fall in the last six months.

Assistant Reserve Bank governor Karen Silk told the media conference after RBNZ’s latest official cash rate decision, which was to raise the OCR from 2.25% to 2.5%, that it’s not just demand that is impacting the housing market but that supply has also changed.

The latest data from StatsNZ showed that while housing consents fell 4% in May from April, the 39,737 consents in the year ended May were up 19% from the previous year and at their highest annual level since the year ended October 2023.

In the minutes from the monetary policy committee meeting, Silk had said that slower than expected net immigration could weigh on rental inflation and house prices.

But RBNZ chief economist Paul Conway told the conference that “house prices are not the only game in town.”

Conway also stressed that “withdrawing monetary stimulus” was the way to frame RBNZ hiking the OCR.
RBNZ expects the economy was weak during the June quarter but that it will be stronger in the current quarter now that oil prices have fallen, although oil prices are still higher now than before the US and Israel began bombing Iran on Feb 28.

RBNZ governor Anna Breman told journalists that while fuel prices have fallen, petrol prices are still about 20% higher than before the conflict began and diesel prices remain about 40% higher.

Westpac economist Satish Ranchhod told Good Returns that the under-building of houses that we had experienced for a decade has now been eliminated after recent strong building activity and subdued population growth.

“That doesn’t mean we’ve got an oversupply,” Ranchhod said, noting that there does appear to be tight supply of affordable housing.

Breman acknowledged the pressure on households and businesses resulting from the tough few years the NZ economy has experienced, but stressed that inflation erodes purchasing power.

“Bringing down inflation will stimulate spending and that will also improve the labour market,” Breman said.

She said that the monetary policy committee has been discussing house prices, which have been moving sideways, and noted the wide differences across the regions – the REINZ data showed house prices in Canterbury are down only 1.1% from the 2021 peak but Wellington prices are down 27.7% and Auckland prices down 23.4%.

Breman emphasised that getting inflation down will mean “households will get their purchasing power back.”

While RBNZ has previously estimated that the neutral OCR, which neither stimulates nor impedes economic growth, is somewhere between 2.5% and 3.5% but Conway said the neutral rate could be higher than that in the short term.

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