New Zealand Housing: A Tale of Two Islands Continues
New Zealand’s housing market is increasingly defined by a stark regional divide. Although Auckland and Wellington continue to grapple with price declines, the South Island – and parts of the North Island outside the major cities – are experiencing growth, creating a “tale of two islands,” according to economists.
North Island Struggles, South Island Surges
Recent Real Estate Institute data reveals a national median price increase of 0.4 percent between January 2025 and February 2026, reaching $753,106. However, this figure is heavily influenced by gains outside of Auckland and Wellington. Excluding these cities, the median price rose 1.4 percent to $700,000.
Auckland and Wellington are still down 23.6 percent and 26.9 percent respectively, since their post-Covid peak. In contrast, the West Coast has hit a record high of $480,000, a 9.3 percent year-on-year increase. Southland, Otago, and Canterbury are also experiencing significant growth, with price increases of 5.7 percent, 6.7 percent, and 3.4 percent respectively.
What $950k could buy you in Auckland. Photo: Supplied
Factors Driving the Divergence
Several factors are contributing to this regional disparity. BNZ chief economist Mike Jones points to internal migration within New Zealand, with more people moving south. The strength of commodity prices is also bolstering incomes in rural and regional areas. Affordability plays a key role, as markets in the South Island are generally cheaper relative to incomes and rents than Auckland and Wellington.
The supply of housing is also a significant factor. Auckland and Wellington are more oversupplied, with increased building activity providing buyers with more choice. This contrasts with the South Island, where supply is more constrained.
Investment Strategies Shift
Property investment strategies are adapting to this changing landscape. Steve Goodey, a property investment coach, advises clients to avoid Auckland if cash flow is a priority, citing a lack of yield. He is instead focusing on smaller towns, recently investing in Invercargill, Whanganui, and Hawera.
While some areas are cheap, Goodey cautions that price rises aren’t guaranteed. He emphasizes the importance of both cash flow and capital gains in a successful investment strategy.
Future Outlook: Continued Divergence?
Experts anticipate that this regional divergence will likely continue. Kelvin Davidson, chief property economist at Cotality, projects a national average house price rise of 5 percent this year, but suggests that Auckland and Wellington may lag behind, while cities like Invercargill and Nelson could experience stronger growth.
House price index data shows Auckland prices are down 1 percent a year over five years, and Wellington is down 3 percent a year over the same period, while Christchurch is up 5.4 percent a year, Queenstown 8.1 percent and Invercargill 5.2 percent.
Auckland and Wellington stand out as being more oversupplied, say housing experts. Photo: RNZ
Frequently Asked Questions
- What is driving house price growth in the South Island?
- Internal migration, strong commodity prices, and relative affordability are key factors.
- Are Auckland and Wellington likely to see price increases soon?
- Experts suggest they may lag behind other regions in price growth, due to oversupply and other economic factors.
- What should investors consider in this market?
- Focus on cash flow and capital gains, and consider smaller towns outside of the major cities.
Pro Tip: Before making any investment decisions, consult with a qualified financial advisor and conduct thorough due diligence on the specific property and location.
What are your thoughts on the diverging housing market? Share your insights in the comments below!
