Source: Cotality NZ
New Cotality analysis suggests New Zealand may already be transitioning to a lower-growth housing market, with the rapid price gains of previous decades becoming less common.
While the national median property value remains 19% below its previous 2021-22 peak, it is still 37% higher than in September 2016, equivalent to average annual growth of 3.2%.
Cotality NZ Chief Property Economist Kelvin Davidson said the figures highlight why comparisons with the previous market peaks, while important, are becoming a less complete measure of housing market performance.
“Being below the previous peak matters enormously for somebody who bought near the top of the market, particularly if they now need to sell,” Mr Davidson said.
“But most homeowners didn’t buy at the peak. When we look over a longer period, the picture changes significantly.
“Across New Zealand, the median property value is still around 37% higher than it was 10 years ago, despite the substantial correction we’ve seen since 2021.”
Only around 83,000 property transactions took place nationally between July 2021 and June 2022, equivalent to slightly less than 5% of the country’s housing stock.
The contrast is particularly apparent at a regional level.
Lower Hutt property values remain around 29% below their previous peak and Wellington City around 28% below, while markets including Hurunui, Mackenzie, Central Otago and Gore are at, or close to, new cyclical highs.
Yet the size of the fall from peak does not necessarily reflect longer-term performance.
Whanganui and Gisborne, for example, remain around 15% and 19% below their previous peaks respectively, but property values in both markets have at least doubled over the past decade.
By comparison, Ashburton and Christchurch are within 1% of their previous peaks, while their property values have increased by 48% and 58% respectively over the past 10 years.
“Looking only at how far a market sits below its peak risks losing sight of what has happened over a much longer period,” Mr Davidson said.
Auckland shows what greater housing supply can achieve
Mr Davidson said Auckland’s recent performance also provided an important case study in the impact additional housing supply can have on property values.
Since 2018, housing stock growth has generally outpaced Auckland’s population growth, aside from the migration spike in 2023.
Auckland consequently sits at the lower end of property value growth over the past decade and has also recorded some of the largest falls from its previous peak.
“Auckland is a powerful reminder of what increased housing supply can achieve,” Mr Davidson said.
“Previous land-use restrictions have loosened considerably, enabling more intensive development in well-connected parts of the city. Greater housing supply is now playing an important role in Auckland’s market dynamics.”
Has New Zealand entered a lower-growth housing market?
The analysis also points to a potentially more significant structural shift.
The rolling 10-year growth rate for New Zealand’s national median property value has recently slowed to an historically low level.
While Auckland has contributed significantly to that national slowdown, Mr Davidson said there were several reasons to consider whether long-term house price growth across New Zealand could be more restrained in future.
Greater housing supply is one factor. Others include the substantial long-term decline in mortgage rates from historical highs, the introduction of debt-to-income restrictions and the possibility that the tax treatment of property could become less favourable in future.
“None of this means periods of stronger house price growth won’t occur again,” Mr Davidson said.
“But we need to consider whether the assumption that property values will consistently grow at the rates seen in previous decades still holds.
“If house price growth becomes more closely tied to household incomes, the long-term trend could potentially shift from the 6–7% rates seen historically towards something closer to 3–5%.
“It’s possible the transition to that lower-growth housing market isn’t something that lies ahead of us. We may already be experiencing it.”