Desperation among homebuyers is pushing New Zealand house prices to record highs, overpowering the government’s efforts to rein in the red-hot market and putting in jeopardy a key policy promises by Prime Minister Jacinda Ardern. Nearly 15,000 homes sold for more than NZ$1 million ($705,100) during the last 12 months, compared with just 5,500 in 2020. In the capital, Wellington, a 50-year-old derelict house deemed “too dangerous to enter” sold for almost NZ$1 million – a price far higher than expected. Such runaway home prices have made New Zealand’s property market one of the most unaffordable in the world, and measures introduced by the government and the central bank have so far done little to cool demand. This is largely because of pandemic-inspired policies that have translated into cheaper mortgages, allowing affluent buyers and investors to upsize their homes and build up portfolios of rental investment properties, while locking out low- and mid–income earners.
The government has tried to rein in the market with policy tweaks by applying new taxes for property investors and putting checks on “flipping” activity, in which investors buy a house, quickly renovate it, and sell it for a large markup. Such investment has pushed house prices up by nearly 30% to a national average of NZ$820,000, on top of a 90% rise in the preceding decade. Homebuyers don’t want to miss out on what seems like a gold rush, and there is no evidence investors are leaving in a hurry. New Zealand’s central bank said this week that it was concerned about high-risk borrowing and that house prices were above sustainable levels. It is proposing tighter mortgage lending and debt-to-income restrictions. Housing has become a policy headache for Ardern, who secured a second term in office last year on the back of her success in handling the coronavirus pandemic. New Zealand has had about 2,500 coronavirus cases, with the last one in February. The government has not been able to remove the red tape around land approval, making land artificially scarce. Private developers say the costs and consent process make properties unaffordable.