Where Housing Prices Have Crashed and Billions in Wealth Have Vanished
In New Zealand, high interest rates have sent property prices sliding nearly 18 percent since November 2021.
New townhouses in Auckland, New Zealand. Because of soaring interest rates in the country, houses for sale now sit on the market for an average of 47 days, with some languishing for many months.Credit…Ruth McDowall for The New York Times
June 19, 2023
Michael Wilson was hopeful when he put his three-bedroom house up for sale: Over a dozen would-be buyers came to the initial showing.
But about a year later, the property is still for sale. Offer after offer fell through because the prospective buyers were unable to sell their homes.
Welcome to New Zealand, one of the world’s most troubled housing markets. Over the last 18 months, homeowners and investors have lost billions of dollars in wealth after prices that spiked during the Covid pandemic started plunging as mortgage rates also soared.
“If we listed it, say, two months before we originally did, it would have literally sold the next day,” Mr. Wilson said. He and his wife, Jade, might finally have found a buyer for their three-bedroom house in Te Awamutu, a pretty North Island town of 13,000 people. But if they are lucky they will be paid about 15 percent less than they originally sought.
Sweden, Britain, Canada and Australia. Few places have experienced as wild a swing as New Zealand, which last week slipped into a recession.
more than $6 billion in household wealth, according to Statistics New Zealand estimates.
record low in the three months through December, and houses now sit on the market for an average of 47 days, with some languishing for many months.
Calls for the government to address the housing shortage grew more urgent in February, when once-in-a-generation storms and flooding damaged thousands of homes on North Island, some irreparably. Then five people died in May in a devastating fire at a hostel in Wellington, the capital, that was inhabited mostly by men without stable housing.
Despite relatively low wages and ample land — New Zealand has a population of five million spread over an area the size of Colorado — a dearth of building, coupled with low borrowing costs, meant that buyers had long been willing to pay for older homes that were poorly built and insulated.
“You’re just lucky to have shelter, rather than worry about the quality of shelter,” said Shamubeel Eaqub, an independent economist in Auckland.
high construction prices limited development.
Property values in New Zealand are also highly susceptible to the rise and fall of interest rates. Unlike U.S. mortgages, which are effectively backed by the government and often set for as long as 30 years, home loans rarely have fixed rates of more than a couple of years. Buyers and homeowners with mortgages now face interest rates of at least 6.5 percent on new loans, up from about 2 percent in 2020.
Housing problems touch virtually every corner of the population, including those on painfully long waiting lists for public housing, underserved renters for whom property ownership seems out of reach and more affluent people who bet big on property and are now seeing their investments fall in value.
Homes are among the least affordable in the world, with a median price of 780,000 New Zealand dollars, or about $480,000, compared with about $407,000 in the United States, according to Redfin.
according to the Reserve Bank of New Zealand. That is partly because there is no capital-gains tax, meaning money made on sales is typically not taxed.