What Next for the Australia and New Zealand Property Markets after Travel Reopened?
Posted by Matthew Andrews on June 2nd, 2021.
The long-awaited travel bubble between Australia and New Zealand that opened in April has allowed residents to travel between the two countries without having to quarantine for the first time in over a year.
While many will use the opportunity to visit loved ones or take a much-needed break, for some the Australia-New Zealand travel corridor marks the opportunity to buy that property abroad that they’ve always dreamed of or sell a foreign property which doesn’t see much use anymore.
We’ll take a look at the state of the Australian and New Zealand property markets and how the travel bubble could impact foreign property purchases in the future.
Prices in Australia Continue to Rise, but Foreign Buyers Aren’t Biting
Residential property prices have surged over the past twelve months, with recent data revealing that the national growth rate struck a 33-year high back in March.
This has been attributed to record low interest rates, a startling rebound in consumer confidence, and a stronger-than-expected recovery in the economy following 2020’s pandemic-induced recession.
With housing stock levels remaining stubbornly low, and in turn driving further demand through FOMO (fear of missing out), house prices in Australia look set to remain high for some time to come.
However, analysts suggest that price growth could soon start to slow from recent ‘unsustainable’ levels.
This can be put down to data showing that foreign buyers are starting to exit Australia, with the share of Australian properties being sold to foreign buyers falling to its lowest level on record.
The pandemic and the closure of international borders has of course played a part in this, but analysts suggest that recent tensions between Canberra and Beijing will have also made Australia less attractive to Chinese buyers, depressing demand.
Will New Zealand’s Property Market Heat Up Even More?
Over the past year, average house prices in New Zealand have surged nearly 23% to NZ$780,000. As a result, the country now has the unenviable status of having the most unaffordable housing market among the 36 nations within the Organisation for Economic Co-operation and Development (OECD).
While New Zealand’s economy wasn’t immune to the pressures brought about by the global coronavirus pandemic, the country’s success in containing the virus has allowed for a swift economic recovery, which combined with record low interest rates has turbocharged New Zealand’s property market over the past year.
Sharon Zollner, ANZ’s chief economist for New Zealand, comments: ‘The economy picked up where it left off, only with lower interest rates, so the housing market has massively outperformed expectations.’
To combat this, the government has promised to build more houses, reformed capital gains taxes, and also made a radical change to the Reserve Bank of New Zealand’s (RBNZ) mandate to also cover house prices.
However, it’s probably going to take some time for these measures to feed back into the housing market.
How Might the Travel Bubble Influence the Australian and New Zealand Property Markets?
With property prices already through the roof in New Zealand, analysts are predicting some Kiwis may look across ‘the ditch’ now that travel restrictions have been lifted.
Property prices in New Zealand have surged so dramatically over the last year that it’s started to make Australia’s notoriously expensive homes look more affordable to New Zealanders.
Analysts predict that Queensland could see an influx of New Zealanders heat up the local market, with the sunshine state already being home to almost 40% of Kiwis living in Australia.
Antonia Mercorella CEO at Real Estate Institute of Queensland comments:
‘I would not be at all surprised to see a surge in migration from New Zealand. Now travel between the two countries can flow freely, I think we will see a new wave of people wanting to move to Australia and that will bring a new level of demand for housing.’
Conversely, New Zealand’s stellar handling of the pandemic, combined with the country’s stunning natural beauty will continue to attract Australians looking for something a little different.
But with many Aussies likely to gawk at New Zealand’s property prices, there may only be limited demand from the other side of the Tasman Sea.
A larger question is what might happen if the travel bubble is expanded to countries such as Singapore, which could bring a larger influx of foreign buyers to both Australia and New Zealand, increasing demand and perhaps driving prices even higher.
While this could prove a headache for potential buyers, anyone selling a property in these markets could enjoy a significant windfall as a result of the Australia-New Zealand travel bubble.
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