Our property market is experiencing a significant oversupply, with the surge in listings over the past 18 months outpacing buyer demand and keeping pressure off prices. In May 2025, the supply on market hit 34,400 – up 5% on the same the prior year, which in itself was already high.

Factors contributing to the oversupply include the backlog of unsold homes and a slowdown in buyer activity due to affordability and economic uncertainty. But while declining interest rates are expected to bolster buyer confidence, it could take some time for the market to rebalance. In comparison to the number of homes for sale in the same months pre-pandemic (2017-2019), Bayleys Insights and Data Analyst Samantha Lee says the regions that are experiencing the highest levels of oversupply for May are Wellington, Hawke’s Bay and Nelson/Tasman.

“The supply in those regions is around 70 - 80 percent higher than what the average used to be.”

At a national level the number of listings for May was 38% higher than normal, and in our biggest city of Auckland it was 43% higher.

Many experts were previously expecting that backlog of listings to have cleared by now, but Lee says the prolonged period of oversupply has been driven by an ongoing mismatch between vendor and buyer expectations.

“For buyers, when there's a lot of properties on the market, so they're just not really in a rush and there’s a lot less FOMO.”

“They're not really feeling the pressure to put in an offer, and when they do it tends to be lower because they know that there are other options out there.”

Equally, vendors’ expectations are often too high.

“Off the back of the interest rates coming down, they’re holding out for a higher price because they believe buyers should have more money to burn, so there continues to be a gap between vendors and buyers.”

That coupled with the cost-of-living crisis and global economic factors, both sides seem unwilling to budge.

WHAT KIND OF PROPERTIES ARE IN OVERSUPPLY?

According to Bayleys latest supply of homes for sale survey, 72% of agents say the number of homes for sale in their market is higher than normal with the same amount reporting that standalone houses were dominating this rise in listings.

“In a couple of markets townhouses and apartments flooded listings, with some configurations of homes less in demand.”

“An example of this would be two bedroom, one bathroom townhouses. They don’t seem to get absorbed as well as the ones with two bedrooms and two bathrooms.”

The data also revealed more than half of Bayleys agents say average priced homes have been experiencing the highest level of surplus.

“So that’s homes that perhaps aren't as unique and are more in the middle of the market.”

HOW ARE VENDORS AND BUYERS RESPONDING?

The data revealed a range of responses from both sides of the market. In response to heigtened supply, just over half of Bayleys agents say vendors are holding out for a higher price, while 34% are reducing prices, 28% became more flexible around conditions, and 24% are delaying listing.

When it comes to buyers, more than two thirds are slow to make decisions, 59% are fussy about homes, just under half are making low offers, 38% are less responsive to communications and 37% are waiting for prices to drop.

So, is it a vendor or a buyer’s market?

“Whilst there are clear headwinds, most of our agents are reporting the market is in neutral territory. This is a vast improvement was last year where agents were often reporting weak conditions.”

Lee says given how long it’s taking for housing stock to move she says it’s important that vendors go above and beyond with marketing if they want to secure a sale.

“When there's on average 38% more homes for sale, you should be thinking about different ways to stage your home or put a bit of money into making your home look appealing.”

“This could be the difference between whether it stands out on the market or not.”

Lee says accurate appraisals are also critical to make sure vendors’ expectations are set at the right level.

“In the current market, if your expectations are too high it’s unlikely the market will rise up to meet you. Realistic expectations are a key ingredient for a successful sale.”

WHEN WILL THE OVERSUPPLY COME DOWN?

Lee says the oversupply has been a consistent issue over the past 18 months, but the trend might be changing.

“During 2024 the flow of new-to-market listings was relatively high which was contributing to the oversupply. In recent months we have seen the flow of new listings slow down. If this continues, it might give the market an opportunity to work through the oversupply. This won’t be quick, it will take time given how high the supply is.”

Given these dynamics, the oversupply may have been peaking, but the exact timeline to reduce down will depend on how quickly buyer demand strengthens in response to economic factors and market conditions.

*Percentage totals exceed 100% where multiple answers were allowed