The New Zealand house price cycles have been driven in part by political governance. Policies have driven the price and rent inflation of our historical boom and bust cycles in the property sector. It has also resulted in some building quality phases which have been less than ideal.
Housing is a central part of the New Zealand economy as it is a major source of investment for many New Zealanders.
The current New Zealand house price upswing began in mid-2012 and has seen a 33 percent rise in national house prices across our country. These figures are made up of a 52% increase in Auckland but only 11% elsewhere in NZ. Historically, Auckland house prices have trended ahead of those in the rest of the country but any significant deviation has previously corrected to some extent, with prices in Auckland falling to levels more consistent with national prices and those in the regions catching up. The recent divergence in prices is unprecedented in historical house price data.
Historical data indicates that nominal house prices in NZ have doubled every 12 years, on average. In the early nineties the Reserve Bank adopted strategies to control inflation, aiming for low and sustainable increases in prices within the NZ property sector. Since then house prices have increased at a more modest pace. Before 1991, house price inflation averaged 12% per year; afterwards it was about 7%. After the previous significant upswings in the 1970’s and mid-2000’s real house prices corrected by falling to levels negating the real increase. When house prices have risen across NZ it has occurred at different rates in different regions. Some upswings in house prices have been driven by house price inflation in Auckland. Statistically Auckland house prices contain predictive information for other regions, but there are other factors influencing regional house prices. House prices outside Auckland have increased at a much slower pace than those in Auckland, and have fallen more frequently, particularly in provincial areas. The Christchurch earthquake is an example of an incident affecting regional prices.
In summary, house prices have more than tripled over the past five decades in NZ, with upswings demonstrating regional variance. The upward trend has not always been sustained – there have been instances where house prices have actually fallen. Although the Auckland market can contain some predictive information for the rest of the country, Auckland house price rises have outstripped the increases in the provinces by 41%.