Eyes on NZ from across the ditch

New Zealand’s housing market has been called the ‘‘canary in the coal mine’’ by property data company Corelogic, which says its Australian counterparts are watching the downturn here to see what may happen in their market.

There were a number of differences between the Kiwi and Australian housing markets, and almost all placed Aotearoa’s market in a more precarious spot.

New Zealand house prices jumped more during the pandemic, ranging 41% from the lowest point to the highest. Although this was matched in some regional markets in Australia, the national figure was lower, at 26%.

Corelogic analysis also pointed out that New Zealand started tightening monetary policy earlier and harder, as the Reserve Bank fought to curb inflation and rein in the overheated property market.

While Aotearoa’s central bank had undertaken seven rate hikes since October, Australia had done only four, starting in May.

The official cash rate (OCR) – which influences home-loan interest rates – is also far higher in New Zealand, sitting at 3% compared to Australia’s 1.85%.

Kiwis are also facing worse inflation, with the cost of goods and services rising at 7.3% a year, compared to Australia’s 6.1%.

The Reserve Bank’s comparably early moves to increase the OCR resulted in the market peaking earlier in New Zealand, with prices reaching their highest in November 2021, while in Australia they kept going up until April.

Unemployment rates are almost identical, sitting at 3.4% in Australia and 3.3% in Aotearoa.

This isn’t the first time New Zealand has been labelled the canary in the coal mine, with an Australian financial services firm putting the label on Auckland back in April. Corelogic NZ chief property economist Kelvin Davidson said due to the Reserve Bank’s early action, and the downturn that occurred, the market was considered a ‘‘blueprint’’ for many market observers.

‘‘People are looking to us as the precedent-setter for inflation and monetary policy and what happens in the housing market.’’

The largest urban centres provide another data point to compare relative house price falls.

Sydney has fallen -5.2% to the end of July, and Melbourne 3.4%.

Auckland and Wellington house values are down about 16%.