New Zealand’s Housing Reset: A Model for Restoring Affordability

Conor's Corner

"Get ready for the Australian correction. Don’t be a victim of FOMO and bias in the Ponzi scheme of overleverage which persists across Australia right now."

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New Zealand’s housing market, once among the most unaffordable globally, has undergone a significant transformation. Following a pandemic-era surge that saw prices climb approximately 30%, the market has corrected sharply, bringing real, inflation-adjusted home values back to pre-pandemic levels.

In 2021, the Demographia Housing Affordability Survey ranked New Zealand with a median multiple of 11.2, indicating severe unaffordability. By 2024, this figure had improved to 7.7, reflecting enhanced affordability.

Contributing to this shift, the Reserve Bank of New Zealand implemented a 2.0% monetary easing, leading to a substantial decline in mortgage rates. Consequently, mortgage repayments as a percentage of household income have decreased from around 50% to just over 35%. 

This combination of lower home prices and interest rates has positioned buyers favorably, with increased affordability and more negotiating power. In contrast, Australia's housing market continues to grapple with affordability challenges, as its median multiple rose from 8.0 in 2021 to 9.7 in 2024. 

New Zealand's approach underscores the importance of allowing market corrections to restore balance, offering valuable insights for policymakers aiming to address housing affordability.