NZ housing market

Inflation in the NZ Housing Market – Explained.

The housing market in NZ has been steadily increasing in house prices. We often hear the news that the New Zealand housing market is at an all time high. That inflation is pushing house prices to an unsustainable level in New Zealand. But what is inflation? How does it work? And what does it mean for you as a homebuyer or home owner in NZ. Shopless has done research on what inflation means, and why it is important to know about and understand. 

What is inflation? 

Inflation refers to a general progressive increase in goods or services. In the housing market we are talking about the steady rise in house prices, across the nation. However there are also economic factors that inflate at the same time. As house prices rise, so too does the price of general groceries. Services become more expensive, to keep up with the supply costs. What can appear to be a dramatic rise in prices in only one area. Creates a domino effect in the other economic categories.

The main problem for New Zealand and other countries that see this steady increase in housing, goods and services. Is that the average income in New Zealand does not see this same increase. Meaning the average New Zealander, is saving less in their personal savings due to increased general costs and not seeing an increase in pay. Making buying or purchasing become less and less achievable as house prices and home deposits steadily rise. 

What does inflation mean for me as a home buyer?  

Inflation limits your choice of home. If you had a budget of $600,000 in the housing market 10-15 years ago, the possibilities would have been endless. With that same rate today, depending on where you live in the country, this would be considered a very highly sought after price. There are a lot of people looking to buy within that range. Bringing down the overall quality of the house and limiting the locations that you can find a house within your set price range.

Inflation decreases your ability to save towards a home. With additional expense added to key household items, the ability to save towards a home becomes less achievable. As you are required to have more flexibility within your budget. 

Inflation puts you at risk of mortgage rate increases. If you are currently pre-approved for a loan, or looking to get a mortgage to purchase a home. The worth of your deposit can fluctuate. When the mortgage rates suddenly spike the price range you were looking to buy in may now be limited, or unattainable. 

If you are looking to build, the price of products to build a home will increase. For those considering building a house, inflation could mean the cost of contractors and appliances within the home may suddenly increase. So if you have made an estimate of the cost to build a home a year prior – when you purchased land – this price could suddenly be a lot more than expected. The components that go into building the house and service fees of contractors increase with inflation.

What does inflation mean for me as a NZ home owner? 

Cost of living increases, less margin of era. As mentioned earlier the cost of living increases with inflation. Regardless of if you have a home or rent, you will eventually notice these increases. The average weekly cost in a NZ household will be more as all household expenses start to increase.  

Increased rates (based on the estimated home price). The rates that you pay on your home, are based off of an estimate in your house price. As house prices increase across areas, so will the rates. When selling your house you want a great estimate on your home, so that you can get top dollar for it. However if you have no desire to sell when the house and land in your area increases, the rates that you are paying also increase. 

Unpredictability of mortgage rates. If you have recently purchased your home. Or find that the margin of era is tight with paying for your mortgage. Inflation, and the current predictions surrounding the NZ housing market are not the greatest for your mortgage. Within the current market mortgage rates are expected to fluctuate or increase. Meaning when it comes to renewing your mortgage it may be different from the desired, or achievable amount. 

Beneficial if you are looking to sell your house. Inflation is a plus for you if you are looking to sell. Particularly if you have a small mortgage or no mortgage. It is likely you will receive a good amount for your house, hopefully leaving you with savings for your next step or move. 

What are the current predictions surrounding inflation in the house market in New Zealand?

The Reserve Bank of New Zealand released a press statement on 19 August 2021, stating that the house prices were at an unsustainable level. They suggested that household spending could not keep up with the current housing price increases. And that the unsustainable house prices were an indicator of future financial instability as a nation. To sum it up, there needs to be a stall in the house prices in the future so that kiwis can afford to live here. Until that happens there is a lot of unpredictability.

As of November 2021, we have seen little changes in the property market. House prices continue to increase to astronomical levels in some places. The interest rate has however taken a slight turn and started to creep up since the reserve bank predictions. This change, as it currently stands, just puts more pressure on home buyers. Particularly first homebuyers, who are looking to buy a house before the interest rate becomes unaffordable for them. 


Shopless has given you an idea of what inflation looks like in New Zealand, and offered some insights into what is predicted in the housing market in the next few years. If you are looking for a home, or looking to sell your home. Make sure to check out the latest properties listed on Shopless here.

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