The View | Auckland’s bold housing reforms an example for Australia’s unaffordable market

While Australia’s housing market has proved resilient, the rebound in prices has only served to heighten concerns about the fall in affordability

Bold zoning reforms by Auckland’s government that aimed to encourage the development of medium-density housing offer a way forward for Australian cities

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Houses in the Remuera area of Auckland on June 13. The bold reforms in New Zealand’s largest city that led to a housing construction boom are a template for other cities and countries where a lack of supply is driving up housing prices. Photo: Bloomberg

Published: 4:30pm, 10 Jul 2023

At first glance, Australia’s housing market is performing significantly better than New Zealand’s. Both countries’ central banks have been among the most hawkish in advanced economies, raising interest rates aggressively to tame inflation at the cost of inducing a recession.

This makes the sudden recovery in Australian house prices this year all the more striking. Since bottoming out in February, home values have risen 3.4 per cent, reducing the peak-to-trough decline to just 5.7 per cent. In Sydney, the largest and most expensive market, prices have shot up 6.7 per cent, according to CoreLogic data.

In New Zealand, by contrast, house prices have yet to find a floor, having fallen for 15 straight months. Last month, they fell at their sharpest pace in eight months, taking the decline in the past year to 10.6 per cent. In Auckland, the country’s largest city, prices have plunged 16.8 per cent since their peak, more than twice the peak-to-trough decline in Sydney, according to CoreLogic.

Yet, while Australia’s housing market has proved more resilient, the rebound in prices has only served to heighten concerns about the deterioration in affordability.

One of the main reasons for the short downturn is the lack of supply. Last month, new listings in the capital cities were 10 per cent below their previous five-year average while inventory levels were more than a quarter below the average for this time of year, according to CoreLogic data.

Supply constraints are particularly acute in the rental market, where the steep rise in interest rates has dampened demand for purchases of properties for investment purposes. In April, there were just under 92,000 rental listings nationwide, down from more than 180,000 at the start of the pandemic and 38 per cent below the average level for the previous decade.

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.css-1m2rp1p{color:#34b8b5;}The View | Auckland’s bold housing reforms an example for Australia’s unaffordable market

The View | Auckland’s bold housing reforms an example for Australia’s unaffordable market