House prices in NZ and everywhere else expected to continue to go up until supply meets demand, says economist
New Zealand has seen an unprecedented housing market boom over the past two years. But it’s not just NZ that is experiencing high demand for housing coupled with limited supply, rapidly escalating prices, and affordability issues. Most countries do too.
According to the latest Knight Frank global house price index, while NZ prices posted the fastest increase over the last five years, nearly 50% of the countries monitored had experienced over 10% annual price increases – up from 13% before the pandemic.
New Zealand, along with Australia, the US, and Canada, made it to the top-10 ranked countries, with annual price increases of over 15%, Stuff reported.
Many cities had even bigger price increases, with the top 25 in the Knight Frank’s city index up by over 20%. The top-rankers include Wellington and Auckland as well as three cities in Canada, four in Australia (including Sydney), and five in the US.
Kate Everett-Allen, Knight Frank researcher, said government stimulus, savings accrued during lockdowns, a pandemic-induced reassessment of lifestyles, and low interest rates had pushed the prices higher. This has left many countries with challenges around housing affordability and supply.
Eric Crampton, The New Zealand Initiative chief economist, said house prices in NZ and everywhere else will continue to go up until new supply meets demand.
“When the ability to build more houses comes in and supply increases, demand will ease, rents will go down and prices will normalise,” Crampton told Stuff. “But supply chains are a mess globally, and in many places it has become harder to get houses up. That’s holding up development. And, in some places like San Francisco, the issues are even harder to address because of restrictive planning regulations.”