Bank of NZ chief economist Tony Alexander made a number of observations on differences between Australia & New Zealand’s housing markets in his weekly market review yesterday.
Australian house prices shot up post-global financial crisis, then shot down in the last 2 years. Mr Alexander gave several reasons not to extrapolate the Australian decline to New Zealand’s market.
Housing stock growth: Australia’s population grew 27% from 2003, NZ’s 22%; Australia’s housing stock grew 30%, NZ’s 20% – “In NZ there is a housing shortage which is getting worse, whereas in Australia there is a (temporary) oversupply”
NZ shortage worsening: NZ’s population has grown by 458,000 in the last 5 years; at an average household occupancy rate of 2.7 people/dwelling, this required 170,000 net extra houses to be built; actual dwelling stock growth was only 126,000 – the NZ housing shortage is growing and will continue to do so as net migration flows are remaining high near 50,000 (1% of population)/year
Debt & debt servicing: Between 2003-19 the household debt servicing ratio in Australia rose from 8.2% to 9.1%; NZ’s ratio has fallen from 9.1% to 7.6%; Australia’s household debt:income ratio has jumped from 134% to 190%, NZ’s has risen from 130% to 164%
Foreign buying: The official NZ data started only in 2016 but show average non-resident buying of 2.5% of all sales, falling now to 0.6%; in Australia, according to an NAB quarterly survey, foreign buying peaked in 2014 near 16% for new properties & 9% for existing ones; fewer than 4% of existing dwelling sales now go to foreigners and 5% of new dwellings
Apartments versus houses: 67% of dwellings built in Australia since 2003 are in multi-unit developments; in NZ, 26%; apartment prices have historically shown greater volatility than prices for houses
Superannuation fund investment: Australian self-managed superannuation funds have geared compulsory superannuation money into housing, but NZ doesn’t have these funds or that downward pressure on prices
Stamp duties & levies on foreign buyers: Australian states have been increasing duties & levies on foreign buyers & owners; NZ abolished stamp duty in the 1980s
Interest-only lending: 40% of lending to Australian households in 2015 was interest only, in NZ 28%; with new restrictions imposed, the interest-only ratios are now near 20% in Australia, 26% in NZ
Construction constraints: Consents for new homes in NZ 34,600 in the year to May, or 1.8% of the housing stock; in Australia, 190,300, or 1.9% – still greater than in NZ even after a fall from 230,000 a year ago; NZ has a shortage of builders across all trades.
Attribution: BNZ weekly review.