House prices are expected to increase over the next 12 months, but how much and how fast are still up for debate.
The housing market had a flat 2024, as the impact of falling interest rates was offset by uncertainty about the labour market, and large numbers of houses for sale.
But economists expect lower interest rates to become more of a force in 2025.
Westpac chief economist Kelly Eckhold said he expected house prices to lift 8 percent over the coming year.
It would be a relatively sharp change from 2024.
"A lot of the indicators of the housing market have shown a pretty significant turnaround because interest rates have fallen quite a long way very quickly."
He said normal house price growth, over the long term, was about 6.5 percent a year. His forecast was a bit above that - "but not necessarily the boom we have certainly seen in years within the last 15 when prices have gone up 10 percent, 15 percent or even 20 percent per annum. We're not expecting that."
He said the large number of properties available for sale should be eroded. "There's a very good balance now between demand and supply."
Eckhold said the pick-up should start in the first quarter of next year (2025). "As we go through next year you've got the combination of improving consumer confidence, interest rates noticeably lower than they have been for three or four years, and a recovering economy."
There should also be signs that the labour market had stopped deteriorating, he said.
"The unemployment rate is expected to peak in the second quarter of next year."
Corelogic head of research Nick Goodall said he expected 90,000 transactions in the housing market in 2025, about 10,000 more than 2024.
"Knowing that when volumes increase, values typically do too, we expect some growth in the market."
He said Corelogic expected 5 percent annual growth in prices.
The big difference for 2025 would be interest rates, he said.
"They're falling now and will be sustainably lower next year as opposed to this year when they have been constraining for the majority of the year. That's a pretty big difference and will add to demand."
The economy was also expected to improve, which was likely to flow through to increasing property prices.
"But some things that have been constraints will continue to be constraints - there are relatively high listings, decent choice for buyers... and unemployment will increase as well."
He said debt-to-income ratios could become a restriction in the second half of the year, as well.
"There is enough that says things will improve in 2024 but there are other restraints which is why we come back to saying 5 percent, not something in the realms of 7 percent to 10 percent that you might otherwise expect if you were told interest rates would be materially lower than this year."
ANZ's economists expected house prices to increase 6 percent in the year.
Infometrics chief forecaster Gareth Kiernan said he expected a slight upward trend in house sales through until mid-2026, and the annual sales total to lift 3.7 percent in 2025.
"We expect labour market weakness and sharply slower population growth to be key constraints on activity, limiting the positive effects of lower interest rates and debt-servicing costs on activity levels.
"However, the mortgage rate cuts and dominance of interest rates driving trends in the housing market over the last five years suggest there could be some upside risks to our sales forecast."
Rental market
And what about the renters?
Rents have lifted sharply in recent years, particularly as the effect of migration was felt on that market.
But the pace softened notably through 2024.
Kiernan said the softening labour market was likely to limit rental growth until the middle of the year and weaker net migration would also limit tenant demand through 2026 and 2027.
"As a result, rental yields will remain low, keeping investor demand for housing subdued."
Eckhold said rents had been rising at unsustainable levels.
"What we have seen in 2024 is rents decelerate... that's been a feature of a few things, there's been lower population growth - last year we had a big flow of migrants into the country and a lot of those people came into rental properties. We don't have the same impetus this year.
"Also importantly, wage growth inflation is moderating. The reduced rise in wages and reduced increase in costs on landlords are all factors that mean rents haven't got the upward pressure they had last year."
Goodall agreed the population would grow more slowly in 2025 than in recent years. "Supply of rental property has been relatively high, too."
People might be willing to pay more in rent as the economy improved, but the market was unlikely to take off, he said.
He said it would be interesting to see what happened with new builds. There were signs of consent numbers bottoming out but construction activity was likely to remain weak for some time to come.
People who were affected by restrictions such as loan-to-value ratios or debt-to-income restrictions might opt for a new build because they were not captured by the rules.
But he said they would want to have confidence that the companies operating were solid and likely to remain in business for the 12 or 18 months it might take to build a house.
