Could Falling House Prices Trigger a Bigger Economic Problem?

Introduction 

New Zealand's property market has undergone a significant transformation. Property values declined 1% over 2025, marking a continuation of a downward trend that has seen the national median house price fall 17.6% from its 2022 peak to $808,430. This shift raises an urgent question: Could falling house prices in New Zealand trigger a bigger economic problem? To understand this, we need to explore how housing wealth affects consumer spending, business investment, and the broader economy. This article examines the complex relationship between house prices and economic stability, drawing on current New Zealand data and lessons learned from similar situations overseas. 

The housing market is not merely about bricks and mortar—it's about the confidence, wealth, and spending power of millions of New Zealand households. When house prices fall, the repercussions ripple through construction sectors, banking institutions, local government finances, and retirement planning. For the general New Zealand public, understanding these connections is essential to making informed decisions about property, savings, and economic expectations. 

The Wealth Effect — How Housing Drives the Economy 

Understanding the Wealth Effect 

The 'wealth effect' is a critical economic concept that explains how changes in asset values influence consumer behaviour. When house prices rise, homeowners feel wealthier and are more likely to spend on consumer goods, renovate their homes, and invest in other assets. This increased spending stimulates economic growth through increased business activity, employment, and tax revenue. Conversely, when house prices fall, this process reverses. Homeowners feel poorer, reduce spending, and prioritise debt repayment. In New Zealand, where home ownership is deeply embedded in the culture, this effect is particularly pronounced. 

During the 2012-2021 boom period, New Zealand experienced this wealth effect in full force. Rising property values created a sense of financial security that drove household consumption and economic growth. Homeowners treated their properties as financial assets that could be leveraged for renovations, business investments, and lifestyle improvements. However, this boom was underpinned by conditions that no longer exist: exceptionally low interest rates, high net migration, and constrained housing supply. Understanding that these conditions have shifted is essential to comprehending current economic challenges. 

How Property Wealth Affects Consumption Patterns 

Research in behavioural economics consistently shows that households adjust spending based on perceived wealth changes, not just actual income. This is why the wealth effect is so powerful in property-dominated economies like New Zealand's. When homeowners see their property valuations rising, they feel justified in making discretionary purchases: new vehicles, home improvements, holidays, and investment in children's education. Conversely, when property values decline, households trim discretionary spending immediately, even if their employment situation hasn't changed. 

This psychological response is particularly pronounced in New Zealand because property ownership is culturally significant and property represents the majority of household assets for most families. The estimated decline in household wealth from the 17.6% fall in property values is substantial—for a household with $800,000 in property equity, a 17.6% decline represents $140,800 in lost wealth. This is not a minor fluctuation; it's a significant blow to household financial confidence and spending capacity. 

NZ's Unique Relationship with Property 

New Zealand has a unique cultural and economic relationship with residential property. Home ownership has historically been a cornerstone of the 'Kiwi dream,' and property investment is deeply embedded in household financial strategy. Unlike some countries with strong rental cultures, New Zealand households view property as both shelter and investment. This makes the New Zealand property market particularly sensitive to price movements. Many households leverage property to build wealth, and falling prices directly undermine this wealth-building strategy. Moreover, the exit of families to Australia—every family leaving is one fewer buyer and potentially one more seller—creates additional downward pressure on the property market while reducing the population base that sustains local economic demand. 

The significance of property in household portfolios cannot be overstated. For many New Zealanders, their home represents their largest financial asset. When property values decline, household net worth falls directly, affecting not only wealth but also confidence, psychological well-being, and spending decisions. This is particularly concerning for households that have leveraged equity to pursue other investments or life goals. 

The Current Price Picture 

Recent Market Trends in NZ 

As of early 2026, New Zealand's housing market presents a sobering picture. The national median house value stands at $808,430, down 17.6% from the 2022 peak. This represents a significant correction from the extraordinary prices reached during the pandemic-era boom. Regional variations are notable: Auckland, traditionally New Zealand's largest and most expensive property market, has experienced a 2.6% decline, while Wellington has fallen 2%. These declines, while seemingly modest on an annual basis, are part of a sustained downward trajectory that shows no signs of reversing imminently. 

The market is also experiencing inventory pressures that are unusual in recent memory. Housing inventory has reached a 10-year high, indicating that supply has outpaced demand. This oversupply of properties, combined with townhouses and apartments flooding the market, suggests that the balance has shifted decisively against sellers. Buyers now have options, and properties are sitting longer on the market, creating downward pressure on prices. 

The Credit and Interest Rate Environment 

The Reserve Bank of New Zealand's Official Cash Rate (OCR) currently sits at 2.25%, but market expectations suggest it may rise late in 2026. This creates uncertainty for borrowers and has already impacted household disposable income significantly. Higher mortgage costs have forced many homeowners to make difficult choices about spending and debt management. Notably, many New Zealand households are using rate savings from previous OCR decreases to pay down debt rather than spend, indicating a cautious consumer approach that restrains broader economic growth. 

Interest rate policy is critical because it affects not only the cost of borrowing but also the expectations of future price movements. If households believe that falling prices will continue and interest rates will rise, they may delay property purchases and accelerate debt reduction, both of which suppress economic activity. 

How Falling Prices Ripple Through the Economy 

Consumer Spending Slowdown 

The most immediate consequence of falling house prices is reduced consumer spending. New Zealand households are experiencing a double squeeze: mortgage payments are higher due to recent rate increases, and household wealth is declining due to falling property values. This combination produces a marked reduction in discretionary spending. Retailers, hospitality businesses, and service providers report subdued customer activity. The services sector, in particular, is struggling with weak demand. This slowdown directly impacts employment in these sectors and reduces the multiplier effects that typically sustain economic growth. 

Consumer confidence has also been shaken by economic uncertainty. When households worry about property values continuing to fall, unemployment rising, or interest rates climbing further, they naturally become more cautious with spending. This creates a self-reinforcing cycle: reduced spending leads to weaker business activity, which pressures employment, which further reduces consumer confidence and spending. 

The Construction Sector Connection 

New Zealand's construction industry is heavily dependent on residential property activity. When house prices fall, homeowners postpone renovation projects, developers shelve new builds, and construction companies lose work. The construction sector is particularly sensitive to property market sentiment because long-term projects depend on expectations of future activity. If developers believe that property prices will continue falling, they are unlikely to commence new projects, creating job losses and reduced demand for building materials and labour. 

The interplay between falling prices and construction is critical. Construction activity generates employment, stimulates demand for materials and services, and contributes to GDP growth. When construction slows, these benefits disappear. Moreover, construction workers who lose employment cannot support their mortgages, potentially leading to increased mortgage defaults and home losses. 

Banking Sector Exposure 

New Zealand's banking sector has significant exposure to the residential property market. Banks have extended vast sums in mortgage lending, and property serves as the collateral for these loans. When house prices fall, the equity position of borrowers erodes. Homeowners who have leveraged their properties to the maximum now find themselves in negative equity or with minimal equity buffers. This creates several risks for banks: increased mortgage default rates, reduced collateral values, and potential forced asset sales that further depress prices. 

Additionally, if property prices fall significantly, banks may need to recognise loan losses and increase provisions against potential defaults. This reduces profitability and may constrain lending capacity. In severe scenarios, banking sector stress could spread to other areas of the economy through reduced credit availability and higher lending costs. 

Local Government Revenue Implications 

Local government in New Zealand depends significantly on rates income, which is typically calculated as a percentage of property values. Falling house prices reduce the rating base, putting pressure on local government budgets. At the same time, councils are facing rising costs for infrastructure, services, and emergency management. Some councils have implemented significant rates increases to maintain service levels, adding further pressure to household budgets and exacerbating the wealth effect. 

Public service job losses, particularly in Wellington due to government sector restructuring, have compound effects on local economies. Fewer public sector workers means reduced demand for rental accommodation, local services, and retail goods. This further depresses economic activity in affected regions. 

Retirement Planning and Superannuation 

Many New Zealand retirees and near-retirees have planned to fund their retirement through property sales or equity release from family homes. Falling house prices undermine these retirement plans. Those who have already retired and downsized now find they have less cash than anticipated. Those still working and planning to retire worry that property sales will generate insufficient funds. This uncertainty affects spending patterns and increases financial stress among older households who have limited ability to improve their financial situation through continued work. 

The psychological impact of retirement security being undermined cannot be overstated. Many retirees who expected to fund 10-15 years of retirement through property equity now face the reality that their asset base is smaller than anticipated. This forces difficult choices: working longer, reducing retirement expectations, moving to lower-cost housing, or increasing reliance on government superannuation. Each of these choices ripples through the economy—working longer keeps valuable experience in the workforce but delays opportunities for younger workers, moving to lower-cost housing increases pressure on those markets, and increased government superannuation spending puts pressure on government budgets. 

The Construction Industry Connection 

The construction sector deserves deeper examination given its strategic importance to the New Zealand economy. During the boom period, construction was a rare bright spot of economic growth, creating employment and generating demand across supply chains. Building companies expanded capacity, trained workers, and invested in equipment based on expectations of sustained demand. Construction employment grew substantially, and construction represented a significant contributor to GDP growth during a period when many other sectors were struggling. 

Now, with house prices falling and consumer confidence weak, residential construction is contracting. Developers have cancelled projects, citing uncertain market conditions. Building companies are cutting staff, delaying equipment purchases, and scaling back operations. This creates a multiplier effect throughout the economy: fewer construction workers spend less in their communities, suppliers to construction lose business, and the GDP contribution from this sector shrinks. The skill losses that occur when trained construction workers leave the industry are particularly concerning, as rebuilding this capacity takes years. 

Supply Chain and Employment Effects 

The construction sector's impact extends well beyond the direct employment of builders and tradespeople. Construction activity drives demand for materials—timber, steel, concrete, electrical components, plumbing fixtures—that support manufacturing and import businesses. It creates demand for transportation and logistics. It generates work for architects, engineers, surveyors, and quantity surveyors. When residential construction declines, all of these supporting sectors experience reduced demand. Small businesses that depend on construction activity see turnover decline and may be forced to reduce staff or close. 

The migration of skilled workers is another significant concern. Trained electricians, plumbers, carpenters, and other tradespeople who lose work in construction may emigrate to Australia or other countries offering better prospects. Once lost, these skilled workers are difficult to replace, as training new tradespeople takes years. This skills drain could constrain construction recovery when the market eventually stabilises. 

Banking Sector Exposure 

The New Zealand banking sector's stability is a cornerstone of economic confidence. Banks have been managing the transition to higher mortgage rates carefully, but stress is apparent in lending data and default rates. The introduction of debt-to-income (DTI) limits, while prudent for preventing future excessive leverage, also constrains credit availability and homebuying capacity, further depressing property demand and prices. 

If falling house prices accelerate or continue for an extended period, banks face several challenges. Mortgage defaults could increase as homeowners struggle with higher interest rates and reduced incomes. Forced sales of foreclosed properties could flood the market and further depress prices. Banks may tighten lending criteria even more, reducing credit availability for home purchases, renovations, and other investments. This creates a negative feedback loop where reduced credit availability further depresses demand and prices. 

International experience shows that banking sector difficulties can quickly spread to the broader economy through credit crunches that affect businesses and households. New Zealand banks remain well-capitalised compared to historical standards, but complacency is unwarranted given the magnitude of property exposure. 

Lessons from Overseas 

Ireland's Property Bust 

Ireland experienced a severe property market collapse following the 2008 global financial crisis. Property prices fell over 50% from peak to trough, devastating household wealth and triggering widespread mortgage defaults. The Irish banking sector was severely impaired, requiring government intervention and international bailouts. The consequences were severe: unemployment soared, emigration accelerated, and the economy contracted sharply. The Irish experience demonstrates the potential severity of housing-driven economic crises when multiple negative factors align. 

The United States Global Financial Crisis 

The 2008 Global Financial Crisis was triggered in large part by the collapse of the US property market following years of speculative excess, poor lending standards, and financial innovation that masked risk. When property prices fell, mortgage defaults cascaded, financial institutions failed, credit markets froze, and the global economy entered severe recession. The US experience demonstrates how interconnected modern financial systems are and how housing market stress can spread rapidly to affect the entire economy. 

Australia's More Modest Declines 

Australia experienced housing price falls of around 20% during certain periods, but the economy continued to grow due to strong commodity exports and immigration. Australia's experience shows that housing market downturns need not be catastrophic if other parts of the economy remain strong. However, Australia also benefited from policy responses and a broader economic diversification that New Zealand doesn't fully match. 

Key Lessons from International Experience 

International experience with housing market crises reveals several critical patterns. First, the severity of housing-induced economic crises depends heavily on the preconditions. When property prices are elevated due to speculation and easy credit, corrections are severe. When fundamentals support prices and credit is constrained by prudent regulation, corrections are more modest. Second, the presence of other strong sectors in the economy is critical. Ireland and the US both suffered severe crises because housing was disproportionately important to their economies. Australia avoided severe crisis partly because mining and commodity exports remained strong. 

Third, the financial sector's exposure to property risk determines how quickly housing problems spread to the broader economy. In the US GFC, complex financial instruments that distributed housing risk throughout the global financial system amplified the crisis. In Ireland, direct bank exposure to property developer loans meant bank failures spread immediately. In contrast, Australia's banking sector, while exposed to mortgages, was more conservatively managed and remained stable. This suggests that prudent banking regulation—like New Zealand's DTI limits and strong capital requirements—can help contain housing-related crises. 

Fourth, policy response matters enormously. Countries that responded quickly with fiscal stimulus, central bank support, and targeted assistance for vulnerable households recovered faster. Countries that attempted austerity during downturns experienced prolonged recessions. This lesson is particularly relevant for New Zealand, as policymakers will face choices about how aggressively to support the economy if downward pressure intensifies. 

Could It Happen Here? The New Zealand Scenario 

The critical question for New Zealand is whether falling house prices could trigger a broader economic crisis similar to Ireland or the US experience. The honest answer is: it's possible but not inevitable, and the outcome depends heavily on policy responses and the trajectory of other economic indicators. 

Current New Zealand data shows some warning signs but not yet crisis conditions. Property prices have fallen 17.6% from peak, but not dramatically compared to the increases during the boom. New Zealand banks remain adequately capitalised. Unemployment, while rising, is not yet at crisis levels. However, several vulnerabilities exist. The labour market is weak, described as the 'largest macro headwind' by policy analysts. Weak demand for services sector employment means income growth is subdued for many households. CPI inflation at 3.1% remains above the Reserve Bank target, though administered inflation at 8.7% is significantly elevated, particularly affecting electricity and council rates. 

Early 2025 bank predictions of 7-10% growth did not materialise, highlighting the difficulty of forecasting and the risk of being caught unprepared by worse-than-expected outcomes. Most banks are now predicting modest 2-5% growth for 2026, but this forecast may prove optimistic if consumer spending continues to deteriorate. 

The Labour Market Link 

Employment is fundamental to economic stability because it determines household income and purchasing power. New Zealand's current labour market is troubled. Unemployment is rising, job creation has slowed, and many sectors are experiencing redundancies. The weak labour market is self-reinforcing: as unemployment rises, consumer confidence falls, spending declines, businesses struggle, and more jobs are lost. 

Mortgage stress is directly related to employment. Households that lose employment struggle to service mortgages, leading to defaults and potentially foreclosures. This creates a feedback loop between labour market weakness and housing market stress. Young workers struggling to find stable employment are also less likely to enter the property market, further depressing housing demand. 

Government Revenue Implications 

The government's fiscal position depends on tax revenues, which are closely tied to employment and incomes. If economic growth slows and unemployment rises, government tax revenues decline while welfare and unemployment benefit expenditures rise. This puts pressure on government budgets and constrains the government's ability to respond to economic weakness with stimulus or support programmes. Income tax receipts are already under pressure from weak wage growth and employment uncertainty. 

Falling house prices also reduce land and property tax bases, affecting both central and local government revenue. This occurs at a time when both levels of government face rising costs for infrastructure, health services, education, and emergency management. The fiscal squeeze could force governments to cut services or raise taxes, both of which can further depress economic activity. 

Regional Impacts and Local Government Challenges 

The impact of falling house prices is not uniform across New Zealand. Auckland and Wellington, the two largest property markets, have experienced notable declines. Wellington has been particularly affected by public sector job losses, which have reduced demand for rental accommodation, retail services, and hospitality. This has cascading effects through local suppliers and supporting businesses. Smaller regions outside major cities often have lower property prices to begin with but face particular challenges as younger residents migrate to larger centres seeking employment opportunities, reducing the local customer base for businesses and services. 

Local governments in struggling regions face a particular bind: property valuations are declining, reducing the rates base, but residents are often less able to pay higher rates due to reduced incomes and employment. Some councils have responded with significant rates increases, putting additional pressure on household budgets. This can create a negative feedback loop where higher rates, combined with economic stress, drive further emigration and property value declines. 

Who Bears the Brunt? 

The impacts of falling house prices are not evenly distributed across the population. Younger households seeking to purchase property for the first time may benefit from lower prices and improved affordability. However, the vast majority of the burden falls on existing homeowners who have seen their wealth decline, and on households dependent on employment in construction, retail, hospitality, and related sectors. 

Those with mortgage debt are particularly vulnerable. Households that purchased property at peak prices and leveraged heavily to do so are now underwater or nearly so, with little equity cushion. If employment is disrupted, mortgage stress quickly follows. Retirees who planned to fund retirement from property sales find their retirement plans undermined. Low-income households, already struggling with rising rates and insurance costs, face additional pressure from reduced job opportunities and potentially rising taxes or reduced government services. 

Differential Vulnerability Across Household Types 

Young families with mortgages are exposed on multiple fronts. They typically have leveraged positions with limited equity, face rising interest costs, and many have experienced income pressures from weak labour markets or redundancies. A loss of employment combined with falling property values puts these households at severe risk of mortgage stress and potential default. First-time buyers who purchased at or near recent peaks face the possibility of substantial negative equity, which could trap them in their properties and discourage moves for employment or lifestyle reasons. 

Construction workers and others in cyclically-dependent sectors face the most immediate employment risks. As construction activity declines, these workers face redundancy and may struggle to find alternative employment quickly. The construction sector employs a large proportion of the workforce, and redundancies in this sector have outsized impacts on communities. Retail and hospitality workers face similar risks as consumer spending declines. These are often lower-wage workers with limited financial buffers to weather unemployment periods. 

Potential Policy Responses and Interventions 

If falling house prices and economic stress intensify, policymakers have several potential tools at their disposal. The Reserve Bank can lower the OCR to reduce borrowing costs, though inflation concerns may limit how far rates can fall. Lower interest rates reduce mortgage stress and can stimulate demand, but they take time to work through the economy and may be constrained by inflation remaining above target. 

The government can deploy fiscal stimulus through increased spending or tax reductions to support demand. Targeted support for vulnerable households, construction sector support, and infrastructure investment can help maintain economic activity and employment. However, fiscal space may be limited by existing government debt levels and revenue pressures from slower growth. Investment in housing supply, whether through government construction or regulatory reform to reduce housing development constraints, could help restore balance to the property market in the long term. 

Targeted banking sector measures, such as temporary forbearance for mortgage borrowers in genuine hardship, could help prevent unnecessary defaults and foreclosures that amplify property price declines. International experience shows that early intervention to prevent defaults is more effective than dealing with the aftermath of widespread foreclosures. 

Silver Linings of Lower Prices 

While the focus of this article is on risks, it's important to acknowledge potential positive aspects of lower house prices. First-time home buyers and those seeking to upgrade to larger properties now face lower prices and, potentially, greater negotiating power. This improves housing affordability, which has been a significant social and economic challenge in New Zealand. 

Lower housing costs could free up household income for other consumption and investment. In the long term, more affordable housing could support economic productivity and reduce wealth inequality. Some economists argue that the pre-2008 property price levels were unsustainably high and that correction to more historically normal levels is healthy for economic balance. 

Additionally, falling property prices may force a reallocation of resources away from property investment toward productive business investment, research and development, and human capital development. This could improve long-term economic productivity, though these benefits would take years to realise. 

What Would Prevent a Crisis? 

Several factors would help prevent falling house prices from triggering a broader economic crisis. First, stabilisation of property prices would prevent further wealth destruction and allow household confidence to recover. This requires either fundamental shifts in housing supply-demand balance or policy interventions that support demand. 

Second, a recovery in the labour market is essential. If employment stabilises and grows, household income improves, mortgage stress diminishes, and consumer confidence strengthens. Labour market recovery requires either business confidence and investment to recover, or government policy to stimulate employment. 

Third, continued stability in the banking sector is critical. This requires mortgage default rates to remain manageable and for banks to maintain confidence in property as collateral. If banks become stressed or restrict credit further, economic contraction would accelerate. 

Fourth, policy support matters significantly. Central bank policy, government fiscal policy, and targeted support for vulnerable households can mitigate the worst effects of economic contraction. However, policy space may be limited if inflation remains elevated and government finances are constrained. 

Finally, immigration trends are significant. The exodus to Australia represents a loss of workers, consumers, and potential property buyers. If immigration can be reversed or net migration stabilised, this would support demand across the economy, including property markets. 

Frequently Asked Questions 

Q: Will house prices continue to fall? 

A: This is highly uncertain. Current market conditions with high inventory and weak demand suggest prices may remain under pressure. However, if interest rates fall significantly, employment recovers, or immigration increases, prices could stabilise or recover. Most analysts expect stabilisation rather than continued sharp declines, but this is not guaranteed. 

Q: What should homeowners do if they're concerned about falling prices? 

A: Focus on financial fundamentals: ensure you can afford your mortgage at higher interest rates, avoid over-leveraging, and maintain emergency savings. Time in the market typically outweighs timing the market. Attempting to sell during a declining market often locks in losses. 

Q: Is now a good time to buy property? 

A: This depends on individual circumstances. For first-time buyers or those with strong finances and long time horizons, lower prices improve affordability. However, the risk of further falls and labour market weakness means careful consideration is warranted. Buyers should ensure they can sustain mortgages even if prices fall further. 

Q: What are the government and Reserve Bank doing about this? 

A: The Reserve Bank is managing monetary policy, considering future OCR changes. The government has various housing and economic policy levers, including DTI regulations and fiscal policy. However, some challenges (like global economic conditions and demographic shifts) are beyond policy control. 

Q: Could this lead to a recession? 

A: A recession is possible but not the base case scenario. A recession would require a significant negative shock or deterioration beyond current expectations. Current bank forecasts suggest slow growth rather than contraction, though risks remain. However, forecasts can be wrong—early 2025 predictions of 7-10% growth did not materialise. The combination of weak labour markets, subdued consumer spending, and tight monetary policy creates risks that shouldn't be dismissed. 

Q: How are rising council rates and insurance costs affecting the property market? 

A: Rising rates and insurance costs are increasingly problematic for property owners. Council rates have risen significantly as councils respond to infrastructure challenges, climate resilience needs, and reduced property tax bases. Insurance costs have surged in many regions, particularly in areas affected by weather events or natural disaster risk. These additional costs reduce the net returns from property investment and increase the threshold price at which properties become affordable for buyers. Higher ownership costs are particularly painful for those with minimal equity who cannot easily sell without losses. 

Q: What's the impact on rental markets if falling prices continue? 

A: Falling property prices could paradoxically tighten rental markets. Some investors may exit the rental market if property values fall below their mortgage debt, or if rental yields are inadequate. Reduced new construction means fewer rental properties being created. Meanwhile, some households may be forced to rent rather than buy if they lose deposits in property value or employment is disrupted. The result could be higher rents and reduced availability of rental properties, particularly at the lower end of the market where demand is greatest. 

Conclusion 

Could falling house prices trigger a bigger economic problem in New Zealand? The answer is nuanced. Falling house prices do create real economic headwinds through reduced consumer spending, construction slowdown, and potential banking sector stress. However, the situation is not yet critical, and a crisis is not inevitable. The outcome depends heavily on the trajectory of employment, consumer confidence, and policy responses. 

The key vulnerabilities are a weak labour market, subdued consumer spending, reduced confidence, and the structural challenges facing local government finances. These factors could interact to create a negative spiral of contraction if they are not addressed. The lessons from Ireland and the United States show that housing-driven crises can be severe when multiple negative factors align, and policy responses matter greatly in determining outcomes. Conversely, the Australian experience suggests that housing declines can be managed without catastrophe if other parts of the economy remain reasonably healthy and policy supports stability. 

The current picture is mixed. On the negative side, property prices have fallen substantially from peak, labour markets are weak, consumer spending is subdued, and many households face mortgage stress from higher interest rates. On the positive side, banks remain well-capitalised, unemployment, while rising, is not yet at crisis levels, inflation is moderating, and there is potential policy space for intervention if conditions deteriorate further. 

For the New Zealand public, the immediate priorities should be understanding these connections between housing, employment, and economic stability, ensuring personal financial resilience through prudent debt management and emergency savings, and remaining informed about policy responses and economic data. For policymakers, the priorities should be supporting labour market recovery, maintaining banking sector stability, ensuring adequate support for vulnerable households, and maintaining policy flexibility to respond to deteriorating conditions. 

The housing sector itself will likely stabilise once fundamental factors improve—particularly if labour markets recover, confidence returns, and immigration stabilises. However, the timing and magnitude of this stabilisation are uncertain. The next six to twelve months will be critical in determining whether falling house prices remain an economic headwind that slows growth or whether they accelerate into a more severe contraction. Vigilance, informed decision-making at both household and policy levels, and coordinated policy responses are essential to navigating this challenging period successfully.