New Zealand’s housing market is presenting a stark contrast between its North and South Islands, a dynamic one economist describes as a “tale of two islands.” While prices in major North Island cities like Auckland and Wellington continue to fall from post-Covid peaks, the South Island is experiencing record highs and robust growth, signaling a significant shift in the nation’s property landscape. This divergence is impacting both sellers and prospective homeowners, creating a complex situation for those navigating the New Zealand real estate market.
National median house prices edged up 0.4 percent between January 2025 and last month, reaching $753,106, according to Real Estate Institute data released Monday. However, this national figure masks a deeper regional divide. Excluding Auckland, prices rose 1.4 percent to $700,000. The contrast is particularly pronounced when comparing the fortunes of the major cities to those of the South Island.
Auckland and Wellington stand out as being more oversupplied, say housing experts. Photo: RNZ
South Island Surges, North Island Stumbles
Auckland and Wellington remain 23.6 percent and 26.9 percent below their respective post-Covid peak prices. In stark contrast, the West Coast has hit a record high of $480,000, representing a 9.3 percent year-on-year increase. Southland’s prices are up 5.7 percent year-on-year, Otago’s have risen 6.7 percent, and Canterbury has seen a 3.4 percent increase. Nelson was the only region to experience a decline, falling 8.9 percent.
On the North Island, only Waikato, Hawkes Bay, and Auckland saw median sales price increases in January compared to the previous year – modest gains of 1.4 percent, 2.4 percent, and 1.1 percent, respectively. Looking at a five-year trend, Auckland prices are down 1 percent annually, while Wellington has seen a 3 percent annual decline. Conversely, Christchurch has experienced a 5.4 percent annual increase, Queenstown 8.1 percent, and Invercargill 5.2 percent. Otago and Southland are also reporting record prices.
An example of what is for sale in Southland for the median price. Photo: Supplied
Migration and Commodity Prices Fuel Southern Growth
BNZ chief economist Mike Jones characterized the situation as a “tale of two islands,” noting the increasingly divergent paths of the North and South Island markets. “It’s becoming more and more hard to even talk about the New Zealand housing market as an entity, due to the fact that it is so divergent amongst those regions,” he said. Several factors are contributing to this trend, including internal migration patterns and commodity prices.
Jones explained that a slow but steady shift of people moving from the North Island to the South Island is underway. This migration is coupled with increased income for those in rural and regional areas due to strong commodity prices. Affordability plays a key role, as South Island markets generally offer lower prices relative to incomes and rents compared to Auckland and Wellington. He anticipates this divergence will likely continue, with the South Island maintaining its momentum.
“The correction in national house prices ended in April 2023. In the 33 months since, house prices have declined an additional 1.4 percent in Auckland and an additional 3.2 percent in Wellington. At the same time, in Canterbury, Otago and Southland, they’ve gone up 17 percent and 20 percent… So it really shows you how divergent the market has been,” Jones stated.
Supply and Investment Dynamics
Increased housing supply in Auckland is also contributing to the price correction, providing buyers with more choices. Jones noted that Auckland and Wellington currently have a higher level of oversupply compared to other regions, though You’ll see signs this dynamic is beginning to slow. Construction activity is picking up even with relatively low population growth.
Property investment coach Steve Goodey highlighted the lack of investment yield in Auckland. “I’m advising clients not to go there for cash flow if that’s what they are after,” he said, adding that while discounts are available, strong returns are not. Goodey has recently invested in Invercargill, Whanganui, and Hawera, favoring smaller towns over tiny ones. He emphasizes the importance of capital gains alongside cash flow, noting that areas like Tokoroa, while cheap, offer limited prospects for price appreciation.
What $950k could buy you in Auckland. Photo: Supplied
Looking Ahead: Continued Divergence Expected
Kelvin Davidson, chief property economist at CoreLogic, reports that sales activity is accelerating fastest outside the main centers. He anticipates that Auckland and Wellington will likely lag behind the rest of the country for some time. “If you look at house prices, we’ve got a projection that we acquire a national average rise this year of 5 percent. I wonder if that is probably going to be a bit below 5 percent with the way things are going but as a round number, call it 5 percent,” Davidson said. “It wouldn’t surprise me if Auckland and Wellington are below that number and Invercargill, Nelson, some of these more second-tier cities are a bit stronger. I could see that lasting for a while just reflecting the shape of the economy at the moment.”
The diverging trends in New Zealand’s housing market underscore the growing regional disparities within the country. The South Island’s economic resilience, coupled with affordability and migration patterns, is driving price growth, while the North Island grapples with oversupply and a slower recovery. The next key data release will be the Real Estate Institute’s figures for February, expected in mid-March, which will provide further insight into whether these trends are continuing.
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