property

New Zealand house prices have grown by approximately 10% in the 2020s so far, representing one of the weakest growth periods in seven decades. According to Infometrics chief forecaster Gareth Kiernan, this trend contrasts sharply with historical data where prices frequently doubled every ten years. This slowdown suggests the traditional “doubling” rule may no longer apply to the current economic climate.

Why is New Zealand house price growth so low in the 2020s?

The current decade’s growth rate is an outlier when compared to the last 70 years of property data. While New Zealanders often expect prices to double every decade, the 10% lift seen since the start of the 2020s is significantly lower than previous benchmarks.

Gareth Kiernan of Infometrics notes that the 2010s saw a 113% increase, and the 2000s saw 107%. He points out that the only other decades with similarly sluggish growth were the 1960s (53%) and the 1990s (45%).

Kiernan also clarified the distinction between nominal and real value. He noted that during the high-growth periods of the 1970s and 1980s, inflation caused house values to increase rapidly in dollar terms, even though their real value may have actually fallen.

Historical growth comparison

The following data illustrates the significant volatility and shifts in New Zealand’s property market over the decades:

• 1980s: 259% increase
• 1970s: 230% increase
• 1950s: 147% increase
• 2010s: 113% increase
• 2000s: 107% increase
• 1960s: 53% increase
• 1990s: 45% increase
• 2020s (to date): 10% increase

What factors are changing the property market fundamentals?

The traditional drivers that pushed house prices upward may be losing their effectiveness. Cotality chief property economist Kelvin Davidson suggests that the fundamental elements of the market are shifting.

Davidson identifies four key factors that previously fueled the “doubling” trend:

1. Interest rate trends: Historically, rates trended downward, making borrowing cheaper.
2. Household income: The shift toward two-income households provided more purchasing power.
3. Land supply: A relatively restricted supply of land kept prices high.
4. Taxation: A favorable tax system for property owners encouraged investment.

Davidson argues these drivers may no longer apply. He notes that interest rates have already reached historically low levels, politicians are looking to increase land supply, and most households are already utilizing two incomes. He expressed caution regarding the future, stating that the fundamentals “do look different.”

How will future growth rates affect property investment?

If the current trend continues, the timeline for wealth accumulation through property will lengthen. Davidson suggests that a more “normal” growth rate might settle around 4% or 5% annually, rather than the 6% or 7% seen in previous years.

This shift has a direct mathematical consequence for homeowners. At a 4% annual growth rate, it would take approximately 18 years for a property to double in value, compared to the 7-to-10-year window many investors have come to expect.

Property investor Steve Goodey views the current market as a standard part of a larger cycle. He suggests that while the market currently feels stagnant or “terrible” to many, it is actually well into a recovery phase.

“When the property market is absolutely booming, everyone seems to believe it is never going to stop booming. When it’s in recession… everyone believes it is never going to stop doing this either,” Goodey said.

Goodey maintains that the fundamental need for housing remains, even if the tools for investing—such as Sharesies—have changed for younger generations.

Frequently Asked Questions

Is the New Zealand property market in a recession?

While some investors, like Steve Goodey, describe the current sentiment as being in a “recession” phase of the cycle, he maintains that the market is actually entering a recovery period.

How long does it take for NZ house prices to double?

Historically, prices have doubled every 7 to 10 years in many periods. However, if growth rates settle at 4%, it could take up to 18 years to double.

Why were house prices so much higher in the 1980s?

The 1980s saw a 259% increase, though Gareth Kiernan notes that high inflation during that decade meant that while nominal prices rose quickly, the real value of the homes may have actually decreased.

What do you think about the future of NZ property? Are we entering a new era of slower growth? Let us know in the comments below or subscribe to our newsletter for more market updates.