New Zealand’s home prices fell to their lowest level in more than three years in August, extending a downturn that began in the early 2022 and raising concerns about the strength of domestic demand as the economy seeks to recover.The Home Value Index fell 0.4% after a revised 0.5% decline in July, property consultancy Cotality said in Wellington on Friday, September 4. Home values are now 18% below their January 2022 peak.The continued decline is adding to pressure on households already facing higher fuel costs and rising unemployment, suggesting that consumer spending is likely to remain subdued.The Reserve Bank of New Zealand (RBNZ), which raised interest rates for a second consecutive meeting this week, said the country’s economic recovery remained uneven. While exports and tourism are showing improvement, household consumption and business investment continue to lag as per Business Times.Cotality Chief Property Economist Kelvin Davidson said the housing market remained largely stagnant and was likely to stay that way into next year.“There’s no sign of a sharp downturn, but equally there’s no catalyst for stronger growth in the near term,” Davidson said.The RBNZ raised its official cash rate to 2.75 per cent on Wednesday as it moved to contain growing inflationary pressures.Policymakers indicated that another interest-rate increase is likely, while signalling they will take time to assess the economy’s response to the tightening measures already implemented.“Economic uncertainty, rising mortgage rates and a high level of properties available for sale are giving buyers little reason to rush,” Davidson said.The approaching general election in early November is also prompting investors to remain cautious, with uncertainty over the direction of future tax policy keeping many on the sidelines, he said.The centre-right coalition government is facing a difficult run-up to the Nov. 7 election, with the ruling National Party trailing in opinion polls. Voters are increasingly frustrated by the government’s claims of being a stronger economic manager as the recovery continues to struggle to gain momentum.New Zealand’s housing downturn is expected to last significantly longer than the decline that followed the Global Financial Crisis, when house values fell about 10% but recovered to pre-crisis levels within five years, Cotality said last month.The Reserve Bank of New Zealand said the prolonged weakness in the property market, sluggish income growth and job insecurity were continuing to weigh on household spending and domestic demand, according to the bloomberg report.The central bank expects house prices to decline 0.5% in 2026 before beginning a modest recovery, with prices projected to rise 2.4% in 2027 and 5.2% in 2028.Cotality Chief Property Economist Kelvin Davidson said a sustained recovery in house prices is unlikely until the labour market and job security improve significantly. He expects those conditions may not be met until well into 2027.