Flat housing market for six to nine months, Cotality says

House prices are likely to stay flat for another six to nine months, Cotality chief property economist Kelvin Davidson said on 23 September. Labour also confirmed it would not bring back its ban on interest deductibility for landlords if it returns to government.

Davidson gave the forecast with August sales and values still soft. Cotality reported 6,175 sales in August, down 11.6 percent on the same month last year, according to RNZ. That was the eighth monthly annual fall in a row. Sales are running at about 89,000 a year. That is below average, but up from 65,000 in 2022 and 2023.

Values are also subdued. National values fell 1.3 percent over three months and 1 percent over the year, and sit 18 percent below peak. Christchurch was the exception, up 0.2 percent over three months.

The buyer mix has not swung back to investors. Investors make up about 23 percent of the market, below their long-term average. First-home buyers remain at record highs.

Tax settings are part of that picture. Interest deductibility lets landlords subtract mortgage interest from rental income before tax is worked out. Labour had phased that out. The current government reversed the phase-out after taking power. New Zealand now allows 100 percent deductibility, according to Cotality. Cotality has said investors have been helped by lower mortgage rates and the full return of deductibility.

Labour has criticised the reversal. It described the restored 100 percent rule as a $2.9 billion landlord tax break, according to Labour. It also said the government left $90 million of the cost out of the current financial year. Its current policy is a 28 percent tax on profit from selling investment property after 1 July 2027. Nine in 10 New Zealanders will not pay it, the party says, according to Labour.

The broader context for the Beehive is that the two statements narrow the near-term tax debate. Labour has taken a return to phased-out deductibility off the table, which leaves deductibility as settled policy across the major parties for now. Attention shifts to Labour's proposed tax on investment property sales, how it would work, and whether it changes investor decisions while sales are low and values sit well below peak. For ministers, flat sales and values limit extra tax revenue and pressure from fast rises, but keep the focus on supply, consents and who can buy.