It’s difficult to compare the residential property markets in different countries, even countries as similar as Australia and New Zealand. Within each country there are wide variations between inner city and suburbia, between city and region, and between houses and apartments.
To complicate the analysis, the reporting of property price movements in the two countries is sometimes based on average prices, sometimes on median prices, and sometimes on multi-factor indices.
Nevertheless, some general trends are evident in recent years.
In New Zealand the property market was rising when Covid-19 hit in early 2020. Unsurprisingly, the uncertainty triggered by the pandemic led to an immediate but small dip in property prices.
That dip proved short-lived and was followed by a dramatic rise from the second half of 2020 through to early 2022. From that peak, prices fell as rapidly as they had risen, eventually giving up nearly half the previous rise by mid-2023. Since then, there has been a very tepid recovery, and the market is still about 10% below its 2022 peak.
Average NZ Property Value 2018-2024
Source: OneRoof
(While the figures from different sources contain some variations, they all reflect the same basic pattern – see for example data from Barfoots, REINZ House Price Index and the QV House Price Index.)
The position in Australia was similar in terms of direction but the size of the movements was different. Like NZ, the arrival of the pandemic led to a small and brief dip in the property market followed by rapid growth from mid-2020 to early 2022. However, that growth was below what NZ enjoyed.
From the peak, the Australian market fell but less than in NZ and over a shorter period – about 5% over six months versus 14% over eighteen months. Since the trough, house prices in Australia have been rising steadily such that the market has fully recovered from the losses of 2022 and is now at an all-time high.
Average Australian House Price 2013-2023 ($,000)
Source: Statista
While the property market in each country has gone through a boom/bust/recovery cycle over the last four years, there are two major differences.
First, NZ saw a greater rise and then a more sustained fall. What explains that? The small size of the NZ market may have contributed to its volatility and the pandemic may have had a relatively greater impact in NZ. Probably more significant was the larger (and earlier) rise in the official cash rate in NZ – from 0.25% in August 2021 to 5.5% by May 2023. By comparison, the RBA cash rate in Australia rose from 0.10% in April 2022 to 4.35% in November 2023.
The second major difference between the two markets is the nature of the ‘recovery’ stage. It has been much weaker in NZ than in Australia. This is demonstrated by the figures for both housing markets released by CoreLogic last week for the year to April 2024.
CoreLogic House Price Index – New Zealand
Annual change to April 2024
Source: CoreLogic
Kiwi house price growth nationwide for the last year was a meagre 0.5%. Prices in Auckland actually fell by 1.8%.
CoreLogic’s NZ Chief Property Economist, Kelvin Davidson describes the current situation as a ‘buyers’ market’ with house prices ‘lacking any strong momentum’. He said that ‘the big picture theme of an ‘underwhelming upturn’ for the property market this year and possibly into 2025 remains on track’.
Davidson’s assessment of the kiwi market is in stark contrast with the results for Australia where house prices hit a new high in April.
CoreLogic Home Value Index – Australia
Annual change to April 2024
Source: CoreLogic
Nationwide house price growth in Australia was 8.7% for the year to April. Perth, Brisbane, and Adelaide recorded robust rises of 21.1%, 16.1%, and 14% respectively.
It’s interesting to consider how booming house prices in these three cities might influence kiwis contemplating a move to Australia. It might be disconcerting and temper migration losses, or it might reinforce the view that there is more upside across the ditch.
One fascinating development is the relationship between house prices in Brisbane and Melbourne. Rapid growth in the former versus stagnation in the latter means the median house price is now the same in both cities. According to realestate.com.au, prices are ‘up 60.7% in Brisbane since the start of the pandemic, compared to 16.5% in Melbourne’.
That’s a remarkable change.
What explains the contrasting market trajectories in NZ and Australia over the last year?
No doubt the interest rate differential between the two countries continues to impact on the respective property markets. A related factor is the relative strength of the two economies. Neither is booming but Australia is marginally better off, thanks in large part to the ongoing strength of its exports.
Two factors are consistently identified as contributing to the rebound in Australian house prices over the last year – very high levels of immigration and a shortfall in the construction of new homes. They are central to the ‘supply and demand’ equation.
These factors appear just as relevant to the kiwi housing market. On a per capita basis, NZ has experienced even higher levels of immigration than Australia. And in terms of a failure to build sufficient new homes in recent years, NZ looks no better than Australia. Against this background, it might be argued that the NZ market should have recovered more strongly.
The counterarguments are that, despite the tepid recovery, NZ house prices are still far higher than they were when the pandemic struck, and current interest rates still represent a formidable challenge to many existing borrowers and potential borrowers. Furthermore, house prices in NZ, as in Australia, are higher than in many (most) comparable countries.
So where to from here for the NZ and Australian property markets? The short answer is it’s very hard to tell.
The most extraordinary event in the last four years was the dramatic spike in Australasian house prices during a worldwide pandemic when both countries had closed their borders. If nothing else, that underscores the difficulty of predicting house prices.
*Ross Stitt is a freelance writer with a PhD in political science. He is a New Zealander based in Sydney. His articles are part of our 'Understanding Australia' series.
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