Is the Australian property boom a sign of things to come for New Zealand? It's a question that has many Kiwi homeowners wondering if they should be envious of their Aussie counterparts. While the surge in house prices in Perth and Brisbane might seem like good news for those across the ditch, the reality is a bit more complex. Personally, I think it's important to remember that Australia is ahead of New Zealand in the property cycle. During the pandemic, Australian house prices rose by around 22%, while in New Zealand, they skyrocketed by roughly 42%. This means that when interest rates started rising, the New Zealand market had a much further fall to go. House prices nationally are still around 15% below their peak, and in Auckland, they're down more than 20%. What makes this particularly fascinating is that Australia didn't experience the same extreme rollercoaster as New Zealand during Covid. Their house prices rose about 22% during the pandemic, while in New Zealand, prices skyrocketed by roughly 42%. This highlights the importance of understanding the unique context of each market. One thing that immediately stands out is the impact of migration. Australia has seen a significant boost in migration, with net migration adding more than half a million people a year to their population at its peak. This has contributed to a more resilient economy and higher confidence among households. In contrast, New Zealand's net migration has fallen to roughly 0.5%, which is a stark contrast to the peak of 2%. From my perspective, this raises a deeper question about the role of migration in driving housing markets. What many people don't realize is that New Zealand and Australia tend to move together, but not exactly. Research from ASB found that New Zealand and Australian house prices have often moved in similar directions, typically with a lag of six to nine months. This means that while Australia's housing market can provide insights, it's not a direct indicator of what's to come in New Zealand. However, the early signals of a housing recovery are beginning to emerge in New Zealand. The number of property transactions has broadly recovered, and listings are being absorbed more quickly than in the past. This is a positive sign, but it's important to note that more homes changing hands doesn't automatically mean prices will rise. In fact, some property markets in New Zealand, such as Invercargill City, Queenstown-Lakes, Christchurch City, and Southland, are now higher than they were at the peak of the market in 2021 and early 2022. This suggests that while a Perth-style boom might not be on the cards, there are signs of a more gradual recovery. In conclusion, while the Australian property boom might seem like a reason for Kiwi homeowners to be envious, it's important to remember the unique context of each market. Australia is ahead of New Zealand in the cycle, and while there are early signs of a recovery, it's unlikely to be as intense as in Australia. What this really suggests is that New Zealand's housing market is on a more gradual path to recovery, and it's important to approach this with a realistic and nuanced perspective.
