The Covid-19 pandemic has caused the housing market to collapse in New Zealand

Michael Wilson was optimistic when he listed his three-bedroom house for sale: more than a dozen buyers showed up. But even after one year the property is still for sale. One offer after another fell through as prospective buyers couldn’t sell their homes.

Welcome to New Zealand, one of the most complex housing markets in the world. Homeowners and investors have lost billions of dollars in wealth over the past 18 months, as mortgage rates have also risen and prices that peaked during the pandemic began to fall.

“If we had put it up for sale two months earlier than we did, it would have sold the next day,” Wilson said.

He and his wife Jade may have finally found a buyer for their three-bedroom home in Te Awamutu, a North Island town of 13,000 people. But if they’re lucky, they get 15 percent less than they originally expected.

The pandemic’s impact on jobs, wages and living conditions has had a yo-yo effect on housing markets in many countries, including Sweden, Great Britain, Canada and Australia. Few places have seen as many ups and downs as New Zealand, which fell into recession last month.

Property in New Zealand has traditionally been expensive and scarce. During the pandemic, home prices rose by nearly 50 percent as people took advantage of low mortgage rates and relaxed lending rules.

Prices have fallen 17.5 percent since November 2021, wiping out more than $6 billion in household wealth after New Zealand’s central bank launched one of the world’s most aggressive rate-control cycles to fight rising inflation. Home sales fell to a record low in the three months ending in December, with homes now taking an average of 47 days to sell.

Despite relatively low wages and large tracts of land for a population of 5 million, the lack of construction, coupled with low borrowing costs, buyers have long been willing to pay for poorly built older homes.

Since the early 1980s, construction in New Zealand has lagged behind population growth, after new zoning laws and high construction costs limited growth.

Homes are among the most expensive in the world, with a median price of NZ$780,000, or about $480,000, compared to $407,000 in the US, according to Redfin.

“You’ve got a lot of people living hand-to-mouth and seeing a huge chunk of their take-home pay eroded by housing costs,” said Chris Bishop, a member of parliament for the centre-right opposition National Party.

By the end of 2021, New Zealand’s two main political parties have signed legislation to make it easier to erect three-storey buildings in central areas of towns and cities to prevent large horizontal sprawl.

However, National Party leader Christopher Lacson said in May that he wanted to return to a model where many houses were built on former farmland on the outskirts of cities.

Meanwhile, homeowners are doing their best to cope with a complicated combination of high mortgages and falling prices.

Lisa Lamberton is selling her Whanganui townhouse and moving north to be closer to her family. Be philosophical about paying higher fees.

“When you own a home, sometimes the prices aren’t in your favor,” Lamberton, 42, said.

Natasha Frost
The New York Times