New Zealand property prices provide insight

She acknowledged that despite this decline, housing affordability had barely improved after prices rose by around 50% during the pandemic.

“Housing affordability isn’t improving, as banks’ utility test rates go up, the amount you can borrow is falling faster than house prices are falling.”

Falling property prices in New Zealand could be a sign of where the Australian property market may land.Credit:Peter Rae

PRD chief economist Dr Diaswati Mardiasmo said Australia was following a similar path, with New Zealand starting to raise rates earlier.

“We will basically follow the same trend. They just started earlier, but we are a bit more aggressive,” Mardiasmo said.

“It gives us a clue as to what could be happening in our country, especially in the [major] cities…they see declines of 10 to 12 percentage points and declines of 5 percentage points in regions.

Barrenjoey’s capital chief economist Jo Masters said while New Zealand is worth watching closely, there are clear differences in Australia that could potentially improve the situation for households at the time. home.

Australian households are starting to feel the pinch of rate hikes as they clamp down on their budgets at the auction.

Australian households are starting to feel the pinch of rate hikes as they clamp down on their budgets at the auction. Credit:Chris Hopkins

“While it is true that the RBNZ is further along in its tightening…they have indicated that they are ready to enter restrictive territory, while the RBA wants to go into neutral territory,” Masters said.

New Zealand also introduced legislation last year that tightened mortgage valuations, Masters said, compounding the effect of rate hikes.

“Given that, you would expect their housing market to fall faster and further,” she said.


Finally, more New Zealand households took on larger debts relative to income, Masters said.

“Leverage in Auckland is much higher than in Sydney or Melbourne. We’re talking here about the ratio of debt to six times your income. Right now in Australia it’s a little less than a quarter of new mortgages, but it’s over 50% in New Zealand,” Masters said.

“One way to think about it is what you saw in Auckland could be our worst-case scenario. If New Zealand can weather this storm, we can take comfort too. Their prices have increased much more and households are much more indebted”.

Masters said she expects the Australian property market to fall 13% from peak to trough, bringing prices back to April 2021.