The New Zealand puzzle: low population, high property prices (and high rents)
New Zealand’s housing market is now slowing, with the economy also slowing - but the slowdown has come after a significant upward spurt which has propelled prices in Auckland to stratospheric levels - and Auckland´s price rises are continuing.
The nationwide median house price rose by a meagre 0.82% to NZ$459,500 (US$308,692) during the year to end-November 2015, a sharp decline from the y-o-y rise of 7.24% in a year earlier, according to the Real Estate Institute of New Zealand (REINZ). During the latest month, house prices declined 0.1% month-on-month.
Of New Zealand’s 12 regions, Auckland recorded the biggest house price rise with a 14% y-o-y rise. Auckland has the country’s most expensive housing with an average price of NZ$ 675,000 (US$453,465), followed by Central Otago Lakes, with an average price of NZ$482,000 (US$327,883) and Wellington, with an average price of NZ$435,000 (US$295,911).
Auckland´s high price rises were followed by Otago (9.7%), Waikato/Bay of Plenty (9%), and Northland (6.1%). House prices rose in eight out of New Zealand´s twelve regions.
In contrast, Central Otago Lakes saw the biggest y-o-y decline in house prices of 9.9% in November 2015, followed by Manawatu/Wanganui (-6.9%), Taranaki (-3.2%), and Southland (-1%).
New Zealand saw spectacular house price rises of about 114% (82.6% inflation-adjusted) from 2001 to 2007. After a pause, there were three years of substantial price rises 2012-2014. Because of this, housing in New Zealand has become really expensive, for a country with such a small population relative to its landmass.
New Zealand´s economy grew by 3.20% in 2014, up from 3% in 2013, 2.7% in 2012, and 1.4% in 2011, according to HSBC. However, the Treasury expects the economy to slow this year, with a projected real GDP growth rate of 2.1%.
Of 1,797,900 private dwellings in New Zealand, 63.7% are owner-occupied, 32.6% rented, and the remaining 3.7% provided free (September 2015).
Median Prices by Region, November 2015