The property bubble in New Zealand is a major national economic and social issue. Since the early 1990s, house prices in New Zealand have risen considerably faster than incomes, putting increasing pressure on public housing providers as fewer households have access to housing on the private market. The property bubble has produced significant impacts on inequality in New Zealand, which now has one of the highest homelessness rate in the OECD and a record-high waiting list for public housing. Government policies have attempted to address the crisis since 2013, but have produced limited impacts to reduce prices or increase the supply of affordable housing. However, prices started falling in 2022 in response to tightening of mortgage availability and supply increasing. Some areas saw drops as high as around 9% - albeit from very high prices.
Unaffordable housing has produced profound impacts on New Zealand society. Between 1986 and 2013, home ownership dropped from 74% to 65%.
Background A house price bubble is defined by economist Joseph Stiglitz as a period of speculative purchases, where investors demonstrate willingness to pay a high price today because they believe that it will be as high (or higher) tomorrow.Stiglitz, J.E. (1990). “Symposium on bubbles”. In: Journal of Economic Perspectives Vol. 4 No. 2, pp. 13–18 A 2016 study found evidence of a bubble in the New Zealand housing market from 2003, which stalled in 2007/8 with the impacts of the Great Recession. A second bubble appeared in Auckland in 2013, and until 2015 there were no notable spillover effects to other regions. However, from 2015 onwards, rapid price-growth occurred in smaller centres.
Housing in New Zealand has been strongly shaped by colonisation (beginning in the 19th century), pre-war state intervention, post-war state intervention and economic and financial reforms introduced since the 1980s. Although the indigenous Māori population traditionally lived communally, European settlers – many fleeing the slum conditions of Victorian Britain – established a trend favoring individually-owned houses, each built on a separate section of land – the fabled quarter acre, in a similar vein to the American white picket fence. New Zealand society as a whole continues to dream the dream of owner-occupied home-ownership despite changing economic and environmental conditions. The local real-estate sector promotes myths of moving onto (and up) the property ladder accordingly, and New Zealand politicians foster the idea of a stable democracy rooted in property-ownership.For example:Compare:Compare:
In 1977, the Town and Planning Act was passed, which began to make it easier for NIMBYs to oppose new housing nearby and force down-zoning. This caused house prices to rise by an average of 2% for every 1% increase in population between 1977-2018, compared with 0.5% rise per 1% population increase between 1938-1977.
The fourth Labour Government (elected in 1984) rapidly introduced policies of economic deregulation, as a result of the previous Prime Minister Robert Muldoon's Think Big policies that had left the country heavily in debt. Investment in shares increased rapidly, often with little due diligence carried out. The 1987 sharemarket crash hit New Zealand's economy especially hard, with the NZSE dropping around 60% from its peak. Many investors who lost heavily in the 1987 crash never returned to the sharemarket, instead opting for the apparently safer option of property investment.
In 1989 Parliament passed the Reserve Bank Act, which emphasised keeping a lid on inflation and on interest rates, which in turn reduced the costs of borrowing for fixed assets such as houses. In the same year, tax exemptions for pension, insurance and other similar investments were abolished, but not for real estate. Two years later, the Resource Management Act (RMA) replaced a raft of regional-planning laws, including the Town and Planning Act. Some have regarded the RMA as an obstacle to building affordable housing. Although builds and sell-offs of state houses have happened in cycles since the inception of the state housing scheme, they were sold off in record numbers during the 1990s without being replaced. The number of state houses in the country peaked at 70,000 in 1991 until the sell-offs.
Alongside institutional reforms in the housing sector, problems with poor-quality construction, historic injustices and under-provision for the needs of indigenous Māori, and persistent income inequality, the lack of affordable housing is a critical issue. Since the Great Recession, the rapid growth in house prices has spawned an affordable housing crisis and housing has been a prominent issue on political agendas since 2013. Despite a number of policy interventions to address the crisis, prices have continued to grow across the country. As shown below, real house-prices increased almost three-fold between 2000 and 2018.OECD Economic Surveys: New Zealand 2019
Affordability crisis While house prices increased almost-continuously from the early 1990s, it was not until 2007 that the media started reporting an affordability crisis. Nationwide, property prices increased 80% in real terms between 2002 and 2008.House Prices Unit (2008) Final Report of the House Prices Unit: House Price Increases and Housing In New Zealand. Wellington: Department of the Prime Minister and Cabinet. The Great Recession led to a 10% drop in nominal prices in 2008, however price growth then picked up again significantly and, by 2014, nominal prices in Auckland were 34% higher than the pre-crisis peak.
As of 2019, the average house price in New Zealand exceeded NZ$700,000, with average prices in the country's largest city, Auckland, exceeding $1,000,000 in numerous suburbs. The ratio between median house price and median annual household income increased from just over 3.0 in January 2002 to 6.27 in March 2017, with Auckland's figures 4.0 to 9.81 respectively.
As of 2021, the average house price in New Zealand exceeded $1,000,000.
In 2017, the Demographia think-tank ranked Auckland's housing market the fourth-most unaffordable in the world—behind Hong Kong, Sydney and Vancouver—with median house prices rising from 6.4 times the median income in 2008 to 10 times in 2017. Another study carried out in 2016 reported that average house prices in Auckland surpassed those of Sydney. That same year, the International Monetary Fund ranked New Zealand at the top for housing unaffordability in the OECD, and has called for taxation of property speculation.
Multiple property owners in New Zealand are not subject to capital gains taxes and can use negative gearing on their properties, making it an attractive investment option. Prospective house-buyers, however, accuse property investors of crowding them out. When the Tax Working Group reported its findings to Parliament in 2019, a capital gains tax was among its recommendations, only to be shelved after failing to secure enough Parliamentary backing.
According to NZ's 2017 register of pecuniary interests, New Zealand's 120 members of parliament own more than 300 properties between them, prompting accusations of conflict of interest. As of 2025, the combined value of these properties amounted to NZD$379 million, with an average individual valuation of $3.16 million.
NIMBY sentiment among established home-owners—particularly towards attempts to relax building density rules in Auckland such as the Unitary Plan—has also been pointed to as a major factor in the housing bubble. In response, a YIMBY movement of mostly younger people has emerged to call for actions against housing unaffordability, including upzoning.
In late 2021, it was reported by property data company Valocity that over 22,100 homes were owned by "mega-landlords" who owned more than 20 properties each, as part of a trend towards further concentration of the housing market by investors.
Regional dynamics
Social impacts of the affordability crisis
Unaffordable housing has produced profound impacts on New Zealand society. Between 1986 and 2013, home ownership dropped from 74% to 65%.Statistics New Zealand (2015). Dwelling and tenure type tables for Auckland from 2013 Census.
The most recent statistics on homelessness, from the 2013 Census, showed that 1% of the population were living in severe housing deprivation. Of this population 71% are temporarily resident in severely crowded private dwellings, 19% live in commercial dwellings or marae, and 10% live on the street or in a car. Between 2017 and 2019, the waiting list for public housing doubled, reaching a record 12,500 in August 2019. In 2018, a report found that emergency housing providers were turning away 80–90% of those seeking assistance. In 2024, eligibility rules for emergency housing were tightened.
The substantial growth of property prices over recent decades has significantly influenced the distribution of wealth in New Zealand. The 2019 National Business Review Rich List showed that eight of the top 25 wealthiest people made their money from property, and 16 of the 20 new additions to the list also became wealthy through property investment. Rising prices have been attributed to various factors including deregulation, mass immigration and politics, with considerable debate over how to address the issue due to its large size relative to the economy.
The Loafers Lodge fire in May 2023, where five people died and 20 were injured, further increased scrutiny on the housing crisis' effects.
Policy responses Policies to address the housing affordability crisis cover land use and planning regulation, state housing provision, rules on ownership and investment, and financial regulation.
National government, 2008–2017 Special Housing Areas In 2013, the government passed the Housing Accord and Special Housing Areas Act 2013, introducing Special Housing Areas (SHAs) to increase land supply in urban areas. Within designated SHAs, developments larger than 14 dwellings were required to allocate 10% of housing at 'affordable' prices. Affordability was defined as 75% of the region's median house price, or a price at which households earning up to 120% of median household income would spend no more than 30% of gross income on rent or mortgage repayments. Research showed that little evidence for the effectiveness of this policy to improve affordability. The act was not extended beyond 2019, after generating disappointing results.
From 2016, the housing development planned by Fletcher Building on a designated Special Housing Area at Ihumātao was opposed by protesters, who set up a camp at the site. Opponents contended that the land was confiscated during the Waikato War in 1863, in breach of the Treaty of Waitangi. In 2017 the United Nations recommended that the New Zealand Government review the designation of Ihumātao as a Special Housing Area, drawing attention to potential breaches of human rights. In 2019, after protestors were served an eviction notice and police presence escalated, the prime minister announced that no development would take place at Ihumātao while the government attempted to broker a solution.
Bright-line test In October 2015 the government introduced a bright-line test to reduce speculative investment. This test applies to all property acquired after the law was introduced, and taxes capital gains at the same level as the seller's income tax rate.
Loan-to-value restrictions The loan-to-value ratio measures how much a bank lends for a property, compared to the property's total value. Loan-to-value (LVR) restrictions were first introduced in 2013 by the Reserve Bank of New Zealand. The restrictions comprised a 'speed limit' on the proportion of high-LVR loans that banks can issue, and a threshold defining high-LVR loans.