After experiencing one of the biggest booms during the pandemic, New Zealand home values have crashed back to 2019 levels.
As illustrated below by Justin Fabo from Antipodean Macro, this decline in home values, combined with falling mortgage rates, has drastically improved housing affordability:
It is not just home prices that have crashed but construction as well. As illustrated below by Fabo, residential building permits and construction rates have fallen sharply.
The outlook for construction is also poor, with the latest ANZ Business Outlook Survey showing that residential construction activity expectations have fallen to their lowest level in a year:
ANZ chief economist Sharon Zollner said the current environment “continues to be tough going for many firms”.
“It appears residential builders are giving up on a recovery any time soon, with a sharp drop in construction intentions this month, to the lowest level in a year”.
One saving grace is that net overseas migration into New Zealand has fallen to a 2½-year low and is tracking around half the historical average.
As a result, New Zealand’s housing shortage has not worsened as a result of the slump in construction.
In fact, New Zealand rental growth has collapsed, according to Cotality, “with net migration having fallen a long way from its peak and the stock of available rental listings on the market still elevated”.
Source: Cotality
As illustrated above, the MBIE bonds data shows that national rents declined by 0.3% in the year to May, the first decline since late 2009.
Housing affordability—both to purchase and rent—has improved significantly in New Zealand.
It is a beautiful house price crash.
