On the surface of things there are many similarities between the New Zealand and Australian housing markets. Following the GFC both countries suffered an underinvestment in home building (especially in Auckland and Sydney), and since then both have seen strong migration-led population growth, a rise in foreign property buyers, and significant house price inflation. Latterly (and perhaps somewhat belatedly) regulators and lenders on each side of the Tasman have tightened funding to head off rampant demand and the public has started to consider the social impact of growing wealth inequality and lower home ownership.
Source: Australian Bureau of Statistics, REINZ
However, dig a little deeper and there are some stark differences that bear noting. First, New Zealand’s migration surge has been proportionately stronger and the supply of new homes has been much slower to respond. At the same time, Australia’s more scalable home building industry has kept pumping out approvals and homes at record rates even as population growth has slowed.
Source: Statistics NZ
Source: Australian Bureau of Statistics
Second, the much larger role of apartments in the Australian housing boom has encouraged significantly more off-the-plan sales, where deposits are paid up to 3 years prior to mortgages being secured and buildings completed. Apartments are an increasingly necessary and popular part of urban living in many parts of the world. But a large number of pre-sales were made to foreign buyers, some of whom are now finding themselves locked out of the local mortgage market and unable to settle as banks get more risk averse.
Now, the outlook for Australian property is certainly not all doom and gloom. Outside of a few localised areas prices are so far holding up. In addition, it seems likely that further RBA interest rate cuts will aid affordability, dwelling completions are lagging approvals suggesting the brakes are being put on supply, Asian banks and alternative investment funds seem prepared to step into the funding hole left by the banks, and there may even be a positive population boost from Australians heading home post Brexit.
But, after an exceptional period of house price gains, clouds are gathering on the horizon and concerns are growing for the Australian housing market. Regardless of how this plays out, there will be lessons to learn for New Zealand policy makers, regulators, property investors and home owners alike.
Senior Investment Analyst
Disclaimer: This is intended to provide general information only. It does not take into account your investment needs or personal circumstances and so is not intended to be viewed as investment or financial advice. Should you require financial advice you should always speak to an Authorised Financial Adviser.