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Summary
- Housing affordability worries could result in more Kiwis shifting to Australia.
- House prices in NZ soared by 21.5% annually, while property prices were up 3.6% annually in Australia.
- The Australian government is not likely to follow NZ’s measures to stop rising house prices, which includes housing tax change.
Property market has been booming in both Australia and New Zealand, but questions remain on which market to go for making an investment in property. Housing makes up a large amount of total wealth in both the countries.
There have been increased housing affordability worries in NZ as house prices have soared over the past year. Subsequently, there have been fears that more Kiwis could shift to Australia amid these concerns.
In the 2021 New Zealand Economics Forum held this month, many speakers noted that soaring house prices could lead to more people shifting to Australia.
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REINZ’s house price index (HPI) showed that house prices in NZ jumped 22% in 2020 and 5.2% in February 2021. The price increase in February was on the back of the gains posted in January.
The nationwide median house price of NZ stood at NZ$665,000, while median house price in Auckland stood at NZ$1.1 million. Further, Stats NZ data released on 30 March showed that the number of new homes consented in February fell to 3,129, slightly lower than 3,285 in the same month last year.
On the other hand, house price growth in Australia has been more moderate than the dramatic increase in prices seen in NZ.
ABS data showed that house prices in Australia increased 3.6% annually, with every capital city seeing a spike for the first time since December 2014. The median house values in Sydney and Melbourne are close to A$1 million each.
Australia not likely to follow NZ in housing tax changes
Jacinda Ardern’s government has come up with a range of measures that includes increase in the time investors can hold a property and avert paying tax from 5 to 10 years. This would also exclude land owners' right to exclude interest payments from rental income.
The government is also setting up a NZ$3.8 billion infrastructure fund to fast-track housing supply.
In the case of Australia, APRA (Australia’s prudential regulator) could step in to cool off the heating housing market. However, market analysts expect that Australia would not follow NZ’s footsteps of cutting off tax breaks related to the property investment. This is because Australia has seen different challenges in terms of housing affordability.
