New Zealanders Misguided About Housing Affordability in Australia

As New Zealanders increasingly migrate to Australia in search of better opportunities, many are unaware of the stark differences in housing affordability between the two countries. Housing affordability campaigner Hugh Pavletich warns that those seeking cheaper housing options in Australia may face unexpected challenges. With a history of advocating for housing reforms since 2004, Pavletich highlights that while New Zealand has seen a decline in housing prices, Australia’s market continues to escalate.

The peak of housing prices in New Zealand occurred in late 2021, locking many potential buyers out of the market. Since then, prices have dropped nationwide, and recent government initiatives appear to be steering New Zealand towards a more manageable housing crisis. In contrast, Pavletich points out that house prices in Australia have continued to rise, exacerbating affordability issues.

Comparing Housing Prices in New Zealand and Australia

According to Cotality Asia Pacific, Australia’s national median house price reached NZ$1.018 million (A$888,941) in November 2023, reflecting a 7.5% increase from the previous year. In stark contrast, New Zealand’s national median price stood at NZ$806,551, a drop of 0.7% year-on-year and 17.4% below its peak in early 2022.

Major urban centres attract many New Zealanders, particularly Sydney, Melbourne, and Brisbane. In November, median house prices in these cities were notably high: Sydney at NZ$1.455 million (A$1.269 million), Melbourne at NZ$943,725 (A$823,495), and Brisbane at NZ$1.164 million (A$1.015 million). These figures highlight the daunting reality for many new arrivals, particularly since the majority of housing options in these cities consist of apartments and units, which are generally less expensive than standalone houses.

Conversely, New Zealand’s three largest cities reported more moderate prices. Auckland’s median was NZ$1.048 million, Wellington’s was NZ$778,148, and Christchurch’s stood at NZ$705,030.

Affordability Challenges and Solutions

The affordability landscape in Australia is increasingly concerning. Tim Lawless, head of research at Cotality, notes that the national median house price is now 8.2 times higher than the annual pre-tax household income. In fact, 45% of income is required to service a mortgage at the median price. While the Australian government has introduced incentives for first-home buyers, such as a 5% deposit guarantee, economists argue these measures further inflate demand without addressing the underlying affordability crisis.

The latest Demographia report ranks several Australian cities among the least affordable globally. Sydney is particularly striking, holding the position of the second least affordable city worldwide, with a median multiple of 13.8. Other major capitals like Melbourne, Brisbane, and Adelaide also feature high median multiples, making homeownership increasingly out of reach for many.

In comparison, Auckland, with a median multiple of 7.7, is classified as “severely unaffordable,” yet it has experienced improvement from a higher ratio of 11.2 in 2022. Pavletich views this trend as a positive development, citing increasing bipartisan support for housing reforms in New Zealand.

Rental markets present a similar picture. In Australia, the median weekly rent has surged to NZ$770 (A$672), with national rents rising by 4.3% over the past year. Sydney’s median rent is particularly high at NZ$925 (A$807), contributing to the pervasive affordability crisis.

Conversely, New Zealand’s average rental asking price decreased to NZ$626 a week in November, down from NZ$646 the previous year. In major urban centres like Auckland and Wellington, rents have similarly declined, indicating a growing opportunity for renters.

As the Australian housing market faces persistent challenges, including low rental supply and escalating costs, New Zealand appears to be on a different trajectory. Initiatives aimed at increasing housing supply and improving planning processes have been implemented in New Zealand, providing a more balanced supply and demand equation.

Lawless suggests that addressing Australia’s supply issues will be critical for long-term affordability. He emphasizes the need for increased housing construction to alleviate pressure on both the purchase and rental markets.

In summary, as New Zealanders contemplate a move to Australia, understanding the complexities of the housing markets in both countries is essential. The stark disparities in affordability may lead many to reconsider their decisions as they navigate the realities of rising costs and limited options.