New Zealand Property Market Update: July 2026 OCR Forecasts and Falling House Prices

Executive Summary

With the Reserve Bank of New Zealand’s July 8 monetary policy review approaching, economists and markets are divided on whether the Official Cash Rate will rise from 2.25% or remain on hold. Meanwhile, the domestic property market continues to soften, with asking prices falling for a fourth consecutive month and property values nearing three-year lows amid high inventory and stabilizing borrowing costs.

Key Takeaways

• Markets see a 75% probability that the RBNZ will raise the OCR by 25 basis points to 2.5% on July 8.
• ANZ economists forecast three total OCR hikes in 2026, aiming for a peak of 3%, despite recent drops in global oil prices.
• National asking prices on Realestate.co.nz have declined for the fourth consecutive month.
• Two-year fixed mortgage rates are currently averaging around 5.2%, though economists note borrowing costs have recently stabilized.

Market Breakdown

OCR Expectations and Inflation Pressures

The RBNZ’s Monetary Policy Committee remains sharply divided. During the previous review, Governor Anna Breman used her casting vote to hold the OCR at 2.25% following a 3-3 split. Heading into the July 8 announcement, inflation remains the primary target. The Consumer Price Index reached 3.1% in the March 2026 quarter, and the RBNZ forecasts a jump to 4.2% for the June quarter. While a recent memorandum of understanding between the US and Iran has eased global oil prices, major banks believe this will not deter the RBNZ. ANZ chief economist Sharon Zollner predicts a 25 basis point hike in July, with two additional increases projected for September and October to bring the cash rate to 3%.

Property Prices Nearing Three-Year Lows

The prospect of further monetary tightening is weighing heavily on the property sector. ANZ forecasts a 2% overall decline in house prices this year. According to Kelvin Davidson, chief property economist at Cotality, house prices are nearing a three-year low. The market is currently defined by high listing inventory and ample buyer choice, which restricts property values. Realestate.co.nz data confirms this trend, showing asking prices falling for the fourth month in a row as of late June.

Mortgage Rate Stability

Despite wholesale borrowing costs rising due to earlier global uncertainties, retail mortgage rates appear to have plateaued. Currently, average two-year fixed rates sit around 5.2%, a significant step up from 4.5% in late 2025. However, economists indicate that with rates stabilizing, there may not be significant additional upward pressure on near-term borrowing costs. Major lenders, including recent adjustments from Kiwibank, continue to tweak their offerings to balance market share growth with profitability.

Summary

For borrowers deciding whether to fix or float their mortgage, the current environment presents a distinct set of trade-offs. While near-term mortgage rates have stabilized around the 5.2% mark for two-year terms, the high likelihood of additional OCR hikes through late 2026 suggests the baseline cost of borrowing could still climb. Fixing for a short to medium term may provide certainty against the RBNZ’s anticipated tightening cycle, whereas floating exposes borrowers to immediate rate increases if the central bank lifts the OCR to 2.5% on July 8.