NZ's houses make $200b in capital gains over 12 months

Wednesday, 14 April 2021

The value of New Zealand’s housing stock grew by almost $200 billion in the year to December.

New data published by the Reserve Bank, shows the combined value of residential properties jumped from $1.19 trillion in December 2019 to $1.39 trillion.

By comparison, the country’s annual gross domestic product (GDP) is $322b.

“Housing stock” includes all private sector residential dwellings (detached houses, flats and apartments), lifestyle blocks (with a dwelling), detached houses converted to flats and “home and income” properties.

New Zealand's residential property stock is now worth $1.39 trillion, more than four times the country’s annual GDP. (File photo)

* Action needed to halt rocketing house prices – CoreLogic

* 101 properties, going, going, gone in Invercargill

The spike reflects skyrocketing house prices. The Real Estate Institute said the national median house price hit a record $780,000 in February.

Just 17.6 per cent, or 1399, properties nationwide sold for less than $500,000 in February, which was a drop of 30.5 per cent on the same time last year.

Infometrics economist Brad Olsen said the rapid rise in the value of the housing stock underscored the increasing concern over widening inequality in New Zealand.

“Houses over the last year have had better earning potential than most Kiwi workers, even as emergency housing spend and the state housing wait list has skyrocketed. The gap between the haves and the have-nots is only getting wider.

“The roaring hot heat in the housing market has taken most by surprise, with concerns a year ago that the economic downturn from Covid-19 would see considerably higher unemployment, which in turn was expected to force unemployed homeowners to sell up as they couldn’t afford their mortgage. Instead, economic activity took a hit while employment hunkered down, supported by the wage subsidy and numerous other supports.

“The fall in interest rates has boosted asset prices even when key housing supply constraints remained in play, helping drive a bigger and bigger wedge in society.”

Last month, the Government announced a suite of policy changes intended to make the property market fairer for first-home buyers.

The moves included an extension of the bright-line test, and an end to investors’ ability to offset interest paid on home loans against rental income.

Finance Minister Grant Robertson said the changes were about tilting the balance of the property market away from investors.

“The New Zealand housing market has become the least affordable in the OECD.

“Taking action is in everyone’s interests as continuing to allow unsustainable house price growth could lead to a negative hit to the whole economy.”

The latest CoreLogic Housing Affordability report, released in February, put the average house price-to-average household income ratio in the last quarter of 2020 at 6.8 nationally. That’s the highest level since late 2016 and in 2004, when it was also 6.8.

It climbed from 6.5 in the third quarter of 2020, reflecting a dramatic upturn in the housing market in the last part of last year.

Average property values nationwide rose by 6.1 per cent in the final three months of the year, and by 11.1 per cent in the whole of 2020.