OPINION: Housing market remains poised for recovery once Middle East conflict resolved

OPINION: There is no doubt that the Middle East conflict has created uncertainty as to where the housing market is heading.

The key question is, once the conflict is resolved, will the market return to a modest improvement, or will it become moribund for the remainder of calendar 2026.

Prior to the conflict erupting in late February there were early signs the market was recovering nicely, and April’s sales data remained encouraging given the challenges the month presented with April invariably a slower month than March given the usual interruptions of Easter, ANZAC Day and school holidays.

The national median sales price in April at $775,000 was down only 0.6% on that for April 2025 with regions in the top half of the country (Northland, Auckland, Bay of Plenty, Gisborne and the Waikato) along with Canterbury, Southland and West Coast all recording price increases.

The regions to be hardest hit in April were the South Island’s Otago, Nelson and Marlborough, and their fall was enough to bring the national number down.

In the important Auckland market, the median sales price stayed above the $1 million mark and was up 2.5% on that for April 2025.

The Middle East conflict’s impact on our housing market has been indirect, in that it has raised issues around confidence to rein in inflation and built concerns that mortgage interest rates might rise. 

The extent of that undermining has shown up in the latest ASB Housing Confidence Survey, with only 20% of people believing now is a good time to buy a house (compared to 27% in January), 19% believe house prices will rise (30%) and 48% believe interest rates will increase (-5%).

At 19%, the public’s belief that house prices will increase in the next 12 months is ahead of the consensus position of the Reserve Bank and the main trading banks, who are forecasting a 0.5% decrease by March 2027*.

It remains to be seen if the experts are correct, and that any upturn in the market is now not likely to 2027.

My on-the-ground reading of the Auckland market is that May activity has picked up slightly over the past couple of weeks across all price brackets. At auctions, homes are selling under the hammer or immediately afterwards.

Given that the housing market at present is driven by existing homeowners, and first-time buyers, who are long-term owners, there seems little to lose by moving forward with housing intentions in the next few months, and a number of vendors and buyers are doing just that.

It is now 4+ years since the market peaked in November/December 2021. In that time the country’s housing market, and the regulations around building and borrowing, have been transformed, and attitudes about the market formed pre 2021 may well now be a little outdated.

The options available to first time buyers in terms of price category and mortgage requirements are considerably different to those of 4-years ago; town houses and apartments now dominate new builds in our major cities; the number of properties for sale and the time available to consider whether to precede with a purchase bare little relationship to previous times; and the use of technology is now a major part of how people go about searching for a home.

A particularly strong belief is the market is ‘grossly overpriced’. While our prices are still ‘high’, compared to countries we like to measure ourselves against, prices now are far more competitive.

Even the belief that it’s not possible to buy a house in Auckland for under $750,000 no longer holds up. In the first four months of this year the selling price of 23% of the homes Barfoot & Thompson sold was under $750,000.

My perspective is the market is certainly primed to grow positively as soon as the Middle East issue is resolved.

*Opes Partners, May 2026

Peter Thompson

Managing Director, Barfoot & Thompson