New Zealand Housing Affordability in Focus: Luxon Urges “Downward Pressure” on Prices Without Committing to Drops

Date Published: 25 June 2024

Key Facts

• Prime Minister Christopher Luxon did not explicitly say he wanted average house prices to fall, seeking only “downward pressure”.
• Housing Minister Chris Bishop stated that house prices need to fall to improve affordability.
• House prices have increased significantly since 2016, making home affordability a major issue in New Zealand.
• Median house prices have climbed over 60% since 2016 and are still unaffordable by international standards.
• The Government aims to increase housing supply across various segments, including owner-occupied, rentals, social housing, and emergency housing.
• Earning a typical wage, a couple would need years to save for a house deposit, with Aucklanders needing 7.4 years.
• BNZ economists predict house prices will climb next year due to various factors, including falling mortgage rates and government policies.

Article Summary

At a recent press conference, Prime Minister Christopher Luxon carefully avoided endorsing a decline in average house prices, despite Housing Minister Chris Bishop’s assertion that such a decline is needed to improve affordability. Luxon expressed a desire for “downward pressure” on housing and rental prices without explicitly calling for a reduction in average house prices. His cautious approach contrasts with past political controversies where calls for lower house prices were met with significant backlash.

Since political debates in 2016, New Zealand has witnessed a substantial increase in house prices, with median prices rising over 60% and making housing largely unaffordable by historical metrics. Despite a recent 16% drop from their peak in late 2021, house prices still loom large relative to incomes. Housing affordability, measured as a ratio of house prices to income, shows New Zealand well above the “affordable” threshold.

The Government aims to address the issue by increasing the supply of different types of housing, yet the impact on prices remains uncertain. Luxon’s comments suggest a nuanced approach that balances affordability with homeowners’ concerns. Economists, meanwhile, anticipate a rebound in house prices next year, driven by lower mortgage rates and policies that support property demand.

As the Government continues to refine its housing policies, an upcoming report from Chris Bishop to Cabinet is expected to provide further details, particularly on rezoning urban and rural land for mixed residential use. Future announcements from Prime Minister Luxon may shed more light on how the Government plans to navigate this complex issue.