Whether you’re looking to sell property New Zealand or buy property New Zealand, you would very curious to know what 2016 holds in prospect for the housing market in the country. New Zealand has had a property boom over the last decade and a half, particularly so in its biggest city Auckland.
The housing market in New Zealand can be divided into the Auckland market and that in the rest of the country. Auckland accounts for 30% of New Zealand’s population and has witnessed an amazing rise in housing prices over the last few years, and shows no sign of slowing down.
Some of the stats related to Auckland are impressive. There has been, for example a 60 percent increase in residential property prices since 2007 in Auckland. In 2015, the growth was 20%. A median property in Auckland costs $874,851 – which is as high as it gets, comparable to what we have in New York or London.
Auckland is certainly an expensive city, and largely because of the massive growth seen in Auckland, New Zealand’s housing market saw a growth of 11.3% in 2015, which compares well with neighbour Australia's 9.8% increase in residential property prices.
So what’s the reason behind Auckland’s housing boom? It’s pretty much the same as any world class city such as London, Paris, Sydney or New York – a high net migration, strong demand from overseas investors and a lack of supply of affordable housing.
Even so, in 2016, we expect property prices in Auckland to cool off a bit. There are many reasons for this. New Zealand’s biggest banks have imposed several restrictions on lending for speculative investment in property. Prices have risen so fast in such short time that a drop is in order. Overseas buyers have probably realized that the market is overpriced, and are hence holding back their investments.
In fact, many of the lending restrictions introduced by the New Zealand central bank have been specific to Auckland. The property market in other cities such as Wellington, Christchurch, and Napier has grown in a healthier manner, and we don’t see the same property bubble here that we see in Auckland. Here the housing market is more stable and there are plenty of affordable apartment available to first-time homebuyers.
So what can be reasonably expected to happen in New Zealand in 2016? Well, outside of Auckland, the growth in other New Zealand cities should be small, flat or even negative this year. The property market in Wellington and Christchurch is likely to remain flat, while Dunedin should experience a steady increase in home prices. Hamilton and Tauranga should see a decent property value growth of 10.3% and 8.6%.
Auckland’s boom has spread to smaller cities nearby such as Newcastle and the Illawarra, where the median house prices have risen by 8% and 7% respectively in 2015. Generally, 2016 should be a year of stability in New Zealand. New Zealand has a new government in power and there is a general sense that everybody knows and is happy about the direction in which the country is headed in.
What is clear is that the construction activity in New Zealand, especially in Auckland, hasn’t kept up the fast rising population and the growth in immigration. Fewer New Zealanders are migrating to Australia these days because of the renewed confidence in the national economy.
There will be a downward pressure on the New Zealand economy for sure because of the recent fall in the Chinese stock market, because China is New Zealand’s most important trading partner. However, this is expected to be temporary.