New data shows that housing shortages in NZ's main cities are well on the way to correcting themselves
New Zealand's two main cities are experiencing a significant shift in their housing markets, with property supply starting to outpace demand after years of chronic shortages.
Cotality’s September NZ Property Pulse saw the national property market remain well balanced - but in Wellington and Auckland, supply has outpaced population growth.
Wellington’s population saw a small decline of -1% in the five years to 2024, which has caused the occupancy rate to drop from 2.97 to 2.82. Auckland’s population growth has remained strong at 7% over the same period - however, this has been overtaken by an even stronger increase in stock (13%). Auckland’s occupancy rate has eased from 3.45 to 3.34 as a result.
Auckland has seen a bit of a construction boom lately, particularly with more intensive development of townhouses and smaller dwellings.
Areas like Hamilton and Tauranga have seen the opposite effect, with a tightening supply/demand balance due to higher population growth and slower additions to stock. However, neither region has seen a price boom, though Cotality notes that prices have been “more resilient” compared to Auckland and Wellington.
Chief property economist Kelvin Davidson (pictured) said that this rise in supply in the major centres is keeping house prices in check, along with lower mortgage rates. He also noted that we’re far from facing an oversupply issue in Auckland and Wellington – just that the housing shortages we saw six to seven years ago have started to correct themselves.
“Wellington has seen a flat population, so it hasn’t taken a lot of the extra supply growth to start correcting that imbalance,” Davidson told NZ Adviser. “Wellington has seen an improvement in supply relative to demand, and it’s the same in Auckland.
“It’s more about trying to fix up shortages rather than emerging into over-supply,” he said.
“I doubt many people drive around Auckland saying ‘look at all the empty houses.’ It’s more about increased construction and affordability looking better. Prices can be controlled and new households can be formed, where people previously might have been bunching up with several young couples living in the same house.”
Where to next?
While construction activity eased off in the June quarter, Davidson said there are reasons to be optimistic about how the supply/demand balance will shake out over the coming years. He noted that while population growth is still slow due to lower migration, this is likely to rebound. On the other end, the current government’s initiatives around construction and development should keep a steady flow of supply coming.
“There’s reason to think that things will stay better balanced compared to what we’ve seen in the past,” Davidson said.
“When you look at what the government is doing now in terms of forcing councils to open up land, easing red tape, making it cheaper to import building materials, streamlining consenting processes, etc. – if all of those things stick through the cycle, I think supply will be better balanced with demand in future.”
The construction industry, which has faced significant challenges, is showing signs of improvement. Lower interest rates are making it cheaper for people to finance new build projects, while lending rules continue to favour new construction.
“No doubt it’s been a tough period for construction firms, but we’re starting to see a few more positive anecdotes coming out of the industry,” Davidson said.
“There are always going to be property types in various parts of the country where people will say, ‘there’s a few too many of those.’ But in general, when you look at the country right now, a lot of areas do seem fairly well balanced.”
