The surge in Australian house prices has sparked curiosity among Kiwi homeowners, especially with cities like Perth and Brisbane experiencing significant growth. However, it's important to approach this topic with a nuanced perspective, as the relationship between the Australian and New Zealand housing markets is complex and not always straightforward. While Sydney's median house price has climbed to nearly NZ$2 million, the story is different in other cities, and the impact on New Zealand is not as simple as a direct correlation.
One key factor is the timing of the housing cycle. Australia didn't experience the extreme rollercoaster of price fluctuations during the Covid-19 pandemic that New Zealand did. Australian house prices rose by about 22% during the pandemic, while in New Zealand, prices skyrocketed by roughly 42%. This significant difference in the magnitude of the boom has led to a larger correction in New Zealand, with house prices still around 15% below their peak, and in Auckland, down more than 20%. Australia's smaller downturn and quicker recovery provide a different context for understanding the current market dynamics.
Migration and economic resilience also play a crucial role. Australia's net migration has been a significant driver of population growth, adding more than half a million people annually at its peak, which is a substantial contribution to the economy. In contrast, New Zealand's net migration has been more modest, and its unemployment rate is higher at 5.4%, compared to Australia's 4.3%. These factors contribute to the confidence of households and support lending, making buyers more willing to invest in property.
The historical relationship between the two countries' housing markets is another important consideration. Research from ASB indicates that New Zealand and Australian house prices often move in similar directions, with New Zealand typically lagging behind Australia by six to nine months. This means that while Australia's housing market can provide insights, it doesn't directly influence the trajectory of New Zealand's market. Instead, both countries respond to similar economic forces, such as interest rates, migration patterns, and bank lending.
In New Zealand, the number of property transactions has broadly recovered, with nearly 80,000 homes sold annually, close to the long-term average of about 82,000. However, this doesn't guarantee a widespread price increase. Some regions, like Invercargill City, Queenstown-Lakes, Christchurch City, and Southland, have already surpassed their peak property values from 2021 and early 2022. This suggests that while the market is recovering, it's not experiencing a uniform boom across the country.
In conclusion, while the surge in Australian house prices may bring hope to Kiwi homeowners, it's essential to recognize the unique circumstances and factors influencing the New Zealand market. The relationship between the two countries' housing markets is nuanced, and a direct comparison may not always be accurate. As an Auckland-based economist and property investment advisor, I believe that understanding these complexities is crucial for making informed decisions in the property market.
