(Bloomberg) — New Zealand house prices may show a modest recovery this year after failing to respond to falling interest rates in the final months of 2024, according to CoreLogic New Zealand.

Prices fell 3.9% last year, the property agency said in data published late last week. Values fell 0.2% in December for their 10th straight monthly decline, the report showed.

Prices rose modestly in early 2024 but buyer optimism wasn’t sustained as the central bank kept borrowing costs high and economic growth stalled. When the Reserve Bank eventually began cutting the Official Cash Rate in August, the property market was flooded with homes for sale and values continued to retreat.

“We suspect that 2025 could prove to be a year of conflicting forces for New Zealand’s housing market with the net result being a relatively subdued upturn in sales volumes and property values,” said Kelvin Davidson, chief property economist at CoreLogic in Wellington. “Our expectation is that values could increase by around 5% across New Zealand as a whole.”

Such a lift would be small compared to the previous cycle, when cheap borrowing costs saw house prices rise 16% in 2020 and 26% in 2021.

Economists expect the RBNZ will eventually cut the OCR to around 3% this year, a far cry from the record-low 0.25% seen in 2020 when the economy was in the middle of the Covid-19 pandemic. 

Davidson said lower mortgage interest rates, and the lowest internal serviceability test rates used by banks when they assess credit risk, will encourage more people to return to the property market and push prices higher. But in a weak economy, job security is an issue for many prospective buyers while the levels of listings on the market is also elevated, he said.

Barfoot and Thompson, the busiest residential realtor in largest city Auckland, yesterday said it had 5,094 listings at the end of December — 16% more than 12 months earlier.

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