NZ vs AU Property: Lessons From NZ’s 17% Fall 📊

And I'm keen to, I suppose, set the scene first.

And from New Zealand's perspective, over the last four years, the post-COVID property cycle has been a lot sharper and more aggressive than what we've seen over in Australia.

We did see our median value surge sort of peak.

since dropped and now really set essentially flat for the better part of three years now.

Meanwhile, over in Australia, you've experienced more of a milder initial correction, I suppose, and that steadily climbed back toward record highs.

So I guess the reason for this conversation today is that with now Australian mortgage rates heading up and inflation quite high, Housing affordability quite stretched.

And of course, more recently, property tax conversations have been to the fore.

Everyone is asking this consistent question of us, and I'm sure of you too, is Australia on the cusp of an NZ style extended slump? Or are there some structural differences across the ditch which might protect the Australian market? So with that, Prima Kelvin, can you maybe kick us off by detailing the New Zealand market over the last few years and how we've kind of got to where we are today and maybe what might be coming for the Australian market?

Yeah, so, I mean, obviously, like a lot of countries around the world, we saw the post-COVID boom, our prices went up over sort of 2020, 2021, sort of pushing 40% over that sort of 18-month period, so a very sharp lift in property values, pretty much spread right around the country, reflecting all of those things that were going on at the time, but clearly lower mortgage rates.

We got down to a pretty typical mortgage rate, and we'll get into the fixed-verse floating thing, the differences here versus Australia.

A pretty typical mortgage rate here was down at 2.5%.

There might have been some rates even as low as 2%.

So most people were about able to borrow at some 3%.

So that's not free money as such, but it's pretty cheap, of course.

So everyone piled into the property market.

A lot of investment.

So property values went up a lot.

But we got to the point where mortgage payments for a typical new 80% LVR mortgage were absorbing 50%, 55% of the typical household income.

Now, I'm not saying that's a magic number or anything, but in hindsight, you look back and say, gee, that's pretty stretched, isn't it? Subsequently, some things changed in the economy.

Of course, we went into recession.

We had then the Reserve Bank having to deal with runaway inflation.

So the OCR went up sharply as well.

Mortgage rates went up sharply.

And so what we saw was property values fell pretty sharply too.

They're down sort of 20% over that next 18 months.