Politicians are entitled to their opinions, but not their own numbers
The romantic notion of the great Kiwi dream – buying your first home for three times your annual wage – has gone the way of the moa. The harsh mathematics of New Zealand's housing market in 2025 tell a story that no amount of political spin can soften, especially after the spectacular crash that followed the pandemic bubble.
Consider this sobering reality: with 2.125 million private houses serving 2.042 million households, we're walking a tightrope. When Auckland's median weekly rent hits $650 and the average New Zealand house costs $881,508, we're not just talking about expensive property – we're witnessing the fundamental reshaping of how New Zealanders live.
The Crash That Changed Everything
The numbers from the recent crash are staggering. House prices peaked in November 2021, then fell 17.80% nationally, bottoming out in May 2023. Wellington was hit hardest, with prices plummeting 25.92% from their October 2021 peak. Auckland wasn't far behind, down 23.64% from its November 2021 high. Values are still down 22.5% from the peak in Auckland, 25% in Wellington, and the country as a whole has prices 17.2% lower than the post-Covid records.
Property sales tell an equally dramatic story. Sales peaked at 100,108 in June 2021, then collapsed to just 58,763 in May 2023 – a 41.30% drop in annual property transactions. This wasn't just a market correction; it was a complete unwinding of the pandemic property frenzy.
The crash was so severe that New Zealand's median multiple – the ratio of house prices to household income – fell from a peak of 11.2 in 2021 to 7.7 in 2024, according to Demographia's housing affordability survey. While still severely unaffordable by international standards, this represented the most significant improvement in housing affordability in decades.
The New Arithmetic of Home Ownership
The numbers don't lie, even when politicians might prefer they did. A typical first-home mortgage of $570,000 at 4.75% interest translates to $686 per week, or nearly $36,000 annually for three decades. That's not just a mortgage payment – it's a generational commitment that would make our grandparents' heads spin.
Back when houses cost three times your annual wages, families made do with second-hand everything, camping holidays, and no restaurant meals. Today's buyers face a vastly different equation: house prices have increased at 5.445% annually over the past 20 years, while wages have lagged behind at 4.2%. This isn't just about lifestyle expectations – it's basic mathematics working against ordinary New Zealanders.
Even after the crash, Reuters estimates suggest that nationwide home prices are approximately six times the average household income, leaving homeownership out of reach for many first-time buyers. The crash helped, but not nearly enough to restore the old social contract of affordable homeownership.
The Landlord's Dilemma
Even property investment, once considered a reliable path to wealth, tells a cautionary tale. Take a real example from the current market: a $794,000 four-bedroom house with a $400,000 mortgage, renting for $624 weekly. After rates, insurance, interest, maintenance, and management fees, the net return is a measly $1,609 annually – just 0.408% on the owner's $394,000 equity.
This isn't sustainable economics; it's financial masochism. Without underlying asset inflation of at least 2% annually, property investment becomes a fool's game. The magic isn't in rental returns – it's in the government's implicit commitment to maintaining inflation levels that protect asset values.
Construction activity has also remained depressed. Residential construction plunged by 4.9% in Q4 2024, to be 25% down from its previous peak in Q3 2022. The pipeline of new supply continues to shrink, setting up future supply shortages even as current oversupply keeps prices subdued.
The International Context
When we compare New Zealand house prices to similar economies, the picture becomes clearer. In New Zealand dollars, median house prices sit at $682,963 in the UK, $698,190 in the USA, $859,692 in Canada, and $1,001,619 in Australia. We're not alone in this crisis, but that's cold comfort for young Kiwis watching homeownership slip away.
In real inflation-adjusted terms, New Zealand's median house price has returned to pre-pandemic levels – meaning the entire pandemic boom has been erased, at least in purchasing power terms.
The Rental Reality
With approximately 625,000 households now renting – about 29% of all private dwellings – we've created a nation of reluctant tenants. These aren't people choosing flexibility; they're families priced out of ownership, paying someone else's mortgage while accumulating no equity of their own.
The mean weekly rent in New Zealand for the year to April 2025 reached $574, with Auckland commanding $631 weekly. However, there are signs of relief: average rent across the country dropped $27 a week in May compared to last year as oversupply finally benefits tenants.
The generational impact is staggering. Children growing up in rental properties today might inherit $250,000 from their parents, but not until they’re 70 years old - wealth that comes too late to influence their own housing trajectory.
Beyond Political Promises
Politicians love to promise housing solutions, but the mathematics of supply and demand operate independently of electoral cycles. Remember then-Prime Minister Jacinda Ardern's grand promise of 100,000 new homes? Pure unicorns and fairy dust – mere theatre and hokum for the masses. The promise evaporated faster than Heretaunga Plains morning mist, leaving behind nothing but disappointed.
With population growing at 1.252% annually and housing construction struggling to keep pace, the pressure cooker of demand continues building. Political promises can't magic houses into existence any more than they can repeal the laws of economics.
The solution isn't in clever policy tweaks, grandiose announcements, or first-home buyer subsidies that merely inflate demand further. It requires acknowledging that our housing market has fundamentally disconnected from local incomes and productivity – and that political theatre won't bridge that gap.
What's Changed, What Hasn't
The fundamental difference between then and now isn't just price – it's expectation versus reality. Previous generations bought homes with low expectations but even lower prices. Today's buyers face high expectations with even higher prices, even after the crash.
Property commentators note that while "a lot of those falls happened over 2022 and 2023," in recent times "it's been a lot flatter. They go up a bit, they go down a bit." The market has stabilised at these lower levels, but they're still far above what most young families can afford.
The old social contract is broken. Where once a single income could secure family housing, today's dual-income households struggle to service mortgages that consume their entire financial capacity for three decades, even at these "crashed" prices.
Current Market Signals
Recent data shows conflicting forces at play. Property values fell 0.2% in December 2024, marking the ninth drop in 10 months. Yet mortgage rates have declined dramatically, with debt-to-income ratio rules now adding new complexity to lending decisions.
National house prices have dropped by more than $137,000 since late 2021, yet some locations are showing signs of recovery. Property sales have started to recover, with 77,445 properties sold in the 12 months to July 2025, up from the trough but still well below peak levels.
The Hard Truth
New Zealand's housing crisis isn't a temporary blip or a problem that can be solved with good intentions and political rhetoric. It's a structural transformation that demands we reconsider everything from urban planning to taxation policy.
The days when hard work and modest expectations guaranteed homeownership are indeed long gone. Even after the most significant housing crash in a generation, the mathematics of homeownership remain stacked against ordinary families. What emerges next will define whether New Zealand remains a place where ordinary families can build generational wealth or becomes a playground for the already-wealthy while everyone else pays rent forever.
For those navigating this challenging landscape: have a plan. Make it one that's tested with evidence, tracked and measured against real outcomes – not political promises or wishful thinking. Consider seeking financial advice from a fee-only fiduciary who has no vested interest in selling you products or properties. The mathematics don't care about our hopes; they respond only to careful preparation and realistic expectations.
The numbers tell the story. The question is whether we're prepared to listen.
Special thanks to Pita Alexander. Statistics sourced from Newsletter, 11 September 2025: "An Update on New Zealand Housing as at 31 August 2025"
Nick Stewart
(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha)
Financial Adviser and CEO at Stewart Group
Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.
The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz
Article no. 425