NZ home values – just how much have they gone up by?

The average property value in New Zealand has increased from $263,562 to $1,027,121 since December 2003, amounting to cumulative growth of 290%, according to data from CoreLogic.

“That represents an annual average increase per year of around 7.5%,” said CoreLogic chief economist Kelvin Davidson.

Based on average values recorded through the CoreLogic House Price Index, the market has consistently been on a rising trend since 2003, save for a downturn during the global financial crisis and the four- to five-year period of rebound that followed it.

Additionally, the COVID-19 pandemic brought a sharp spike in property values, which Davidson said was now giving way to “early stages of correction.”

“A key underlying trend through all of this has been the long-term declines in mortgage rates and the more relaxed credit environment, albeit both of those factors have now gone into reverse,” Davidson explained.

Among the country’s main centres, Hamilton saw the largest increase in average property values, recording an increase of 330% since 2003. This was followed by Dunedin with 298%, then Auckland with 287%. Wellington, meanwhile, saw a 282% increase and Tauranga 277%. By comparison, Christchurch saw slower growth at 236% due to a surge in housing supply after the 2011 earthquake.

Davidson added that New Zealand’s housing market is now “clearly into a correction phase,” with values set to drop by “perhaps 10% from peak to trough, if not a little more than that.” A tighter credit environment and higher interest rates could be expected in the long term, capping the rate of capital growth.

“That would help to alleviate some affordability pressure for would-be first home buyers, but may also bring into question the economics of being an investor,” Davidson said. “After all, with less capital growth, low yields, and higher interest rates (as well as increased tax bills), overall returns would be reduced, and cashflow wouldn’t be as favourable either.”