Think of New Zealand and it’s likely that one of either the Lord of the Rings, the All Blacks or the Flight of the Conchords pops into your head – usually with a few mountains, fields and rivers thrown into the background for good measure. The country has built a global reputation as a land of unrivalled local hospitality, rugged beauty and adrenaline fuelled activities.
However, whilst the British and Irish Lions’ tour of New Zealand has generated the most global attention for the country over the last few months, another story has stolen the headlines from the men with odd shaped balls over the past five years – New Zealand real estate.
The country has seen an astronomical boom in demand for residential property in recent times. In a 2016 Knight Frank report ranking global house price growth, New Zealand was second to Turkey. However, once the impact of inflation was stripped out it came top of the list, with an astonishing 11 per cent annual growth. To put that in context, UK house prices grew 5.2 per cent last year. Bilbo Baggins’ home must be worth a small fortune by now.
Average prices in Greater Auckland, a prime example of the housing price boom, rose 80 per cent between 2011 and 2016 to £550,000, outstripping the average London property price of £472,384. And we think London millennials have it bad…
What’s behind the boom?
Undoubtedly, the main factor has been a huge surge in demand from international buyers, driven (pre-2016 at least) by the country’s attractive price point. Moreover, there is also no stamp duty in New Zealand, and properties held for longer than two years are exempt from capital gains tax, adding to the draw even further.
However, price aside, the market has also been affected by macro-economic factors. Local estate agents have argued that international high-net-worth individuals are buying homes in New Zealand because they see the country as safer, both geopolitically and economically, than many parts of the West.
Indeed, in the aftermath of the European referendum result, Immigration New Zealand revealed a spike in the number of queries from UK nationals. In the 49 days following the vote, more than 10,000 Brits registered their interest – compared with 4,599 during the same period the year before. It is perhaps no surprise that ‘safe’, English speaking Canada saw similar levels of interest too…
However, growth is now slowing. Median house prices across New Zealand increased by a much less booming 6.7% in the year to May 2017, according to the latest data to be published.
In large part, this is in response to initiatives introduced by a cautious government keen to ensure that housing remains affordable for New Zealanders themselves and that locals aren’t priced out of the market. For example, New Zealand’s central bank has now imposed strict new deposit requirements, making investors put down at least 40 per cent of the purchase price in cash.
Inevitably, demand has also stemmed as prices have grown.
Be under no illusion though, New Zealand’s housing market truly has gone global and the country is more connected to the international marketplace than ever before. The phrase once used by Flight of the Conchords to describe their homeland, “It’s like Scotland, but further,” no longer seems appropriate. New Zealand is no longer a distant ex-colonial outpost. Instead, the country is a modern, connected, global real estate market, attracting investors from all over the world at an unprecedented rate.
So next time you picture Aragorn playing rugby on a mountain, whilst Flight of the Conchords play their guitars in the background, throw a nice (expensive) looking house into the scene too would you?