Cotality NZ Chief Property Economist Kelvin Davidson says buyer caution remained a defining feature of the country’s broader housing market through the first two months of 2026. “Sales volumes remain fairly sluggish and that’s a reminder that confidence takes time and is still rebuilding.”
Global uncertainty and inflation pressures continue to pose unknown risks, he says. “The US-Israel-Iran conflict and higher fuel prices are potential inflation risks in the near term, but if those pressures prove temporary the Reserve Bank should still be able to hold the OCR steady,” he says.
Same message from ANZ chief economist Sharon Zollner who told RNZ that “there’s a train of thought that thinks of economics as energy transformed, that’s how important energy is. If it spikes up, then down again quickly, there’s no harm done. If it stays high, it’s a problem.
Even now Zollner says “It’s a pretty substantial shock that is negative for activity and growth. it would be inflationary beyond the price of petrol because fuel was an input into pretty much everything. Sharp increases in gas prices led to higher fertiliser prices, which could affect food costs.”
Sales volumes in the domestic housing market, a proxy for confidence in the economy, have fallen again, extending a slow start to 2026 even as property values remain broadly stable on the back of improved affordability and lower mortgage rates.
”Around 59 percent of existing mortgages by value are due to be repriced over the next 12 months, which could provide some relief for households if borrowers move onto lower interest rates,” says Davidson..
“December activity looked unusually strong, so some of the recent softness may reflect timing rather than a new downward trend. But even allowing for that, the housing market is still in a phase where buyers are taking their time.”
Is it already too late?
“The escalating conflict in Iran represents a significant geopolitical shock that is already rippling through global markets. The primary driver is a massive spike in uncertainty.” says Dr Murat Ungor, Department of Economics, University of Otago
“Economic research provides strong evidence of these effects. Economists Dario Caldara and Matteo Iacoviello developed a Geopolitical Risk index based on newspaper coverage of geopolitical tensions, tracking adverse events and associated risks since 1900.
“The index spikes around major events such as World War I, World War II, the Korean War, the Cuban Missile Crisis, and the September 11 attack, all periods associated with major economic and financial disruption.
“Their research shows that higher geopolitical risk is typically followed by lower investment, declining stock prices, and weaker employment. More concerningly, elevated geopolitical risk is associated with a higher probability of economic crises and larger downside risks for the global economy.
“More recent research published in the Journal of International Economics by Caldara and his colleagues examines whether geopolitical risks raise or lower inflation. Their findings are particularly relevant to the current situation: geopolitical risks tend to foreshadow higher inflation, although the strength of the effect varies across countries and historical periods.
“This inflationary pressure is often accompanied by weaker economic activity, higher military spending, rising public debt and money growth, supply disruptions, and declining international trade.
Geopolitical risks also increase inflation uncertainty and raise the likelihood of significant inflation spikes, developments that policymakers and markets will be watching closely in the months ahead.”
