Key Facts

  • New Zealand’s house prices experienced a rollercoaster ride since 2020 due to COVID lockdowns.
  • Similar trends were observed globally, with low interest rates fueling borrowing and house price increases in many countries.
  • However, in New Zealand, the increase in house prices was notably more severe and was followed by a sharp decline.
  • Kiwi homeowners have been heavily affected by recent interest rate hikes, resulting in a 14% average fall in house prices, and up to 20% in Auckland and Wellington.
  • Contrarily, several other countries such as the US, Canada, the UK, and Australia have maintained steady or increasing house prices due to various factors, including fixed mortgage rates, migration flows, and different lending terms.

Article Summary

New Zealand’s housing market has experienced significant volatility since 2020, an event mirrored globally but with unique local outcomes. Following the first COVID lockdown, house prices took flight before sharply falling and recently stabilizing. The tumultuous period, catalysed by drastically lower interest rates, has left Kiwi homeowners and prospective buyers feeling uncertain.

Analysis provided based on OECD data, compares movements in house prices across New Zealand, the US, Canada, UK, Ireland, and Australia. It shows that all markets experienced an upward trend in house prices since 2015, and then a dramatic increase from 2020. However, unique to New Zealand is the subsequent rapid decline in house prices from the COVID-induced peak. Effectively, New Zealand is currently the only country among the comparison group where house prices have fallen below their peak levels.

The factors leading to the sustainability or increase in house prices in countries like the US, Australia, Canada, and the UK vary. Fixed mortgage rates in the US, significant migration influx into Australia coupled with a struggling construction sector, and longer-term rates being lower than shorter-term rates in Canada have all played roles in these nations. Additionally, in the UK, low unemployment levels, pent-up demand post-COVID, and construction cost inflation have kept house prices at record levels.

In conclusion, across different markets, despite higher interest rates, house price increases have largely resulted from a mixture of low supply, pent-up demand, construction cost inflation, significant income increases, and low unemployment rates. New Zealand’s booms and hangovers appear to be noticeably steeper, but the overall trends after economic shocks typically return to baseline levels in growing economies.

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