New Zealand Housing Markets: Just a Bit-Player in the A-League?

Abstract

House price trends in each of New Zealand and Australia are frequently discussed as national level developments. Sub-national developments are also important, especially where regions display idiosyncratic trends driven either by demand factors (differential income patterns) or by supply factors (geographical or regulatory restrictions). At a broader scale, it is possible that the New Zealand housing market, or a specific regional housing market (e.g. Auckland), is part of a broader Australasian housing market. If this were the case, New Zealand house prices would converge to a broadly stable ratio of house prices in Australia. One reason this could occur is if international macroeconomic and asset price trends dominate housing market outcomes. New Zealand authorities may then be relatively powerless to control the major real determinants of house prices through regulatory or other policies. We extract the major drivers of house prices at regional levels within New Zealand and Australia to examine the degree of differentiation across regional housing markets. While some minor regional differences are apparent, the evidence points to the dominance of a single trans-Tasman housing trend.

Keywords: House price convergence, international housing markets, Australasia

JEL Classification: R21, R31