The Industry Abroad: How New Zealand’s market mirrors Canada’s

Canada and New Zealand are almost as far apart on the planet as it’s possible to get. Yet we share remarkably similar housing markets.

Although you wouldn’t know it now, not long ago New Zealand was a country with a soft-touch real estate sector. The island nation’s previous light regulatory approach led to high investment, increased foreign ownership, supply challenges and soaring costs, with home prices now often more than nine times the average household income.

We’re all too familiar with this scenario in Canada, of course. Both nations’ real estate markets currently rank among the least affordable worldwide. In recent years the two countries have aggressively buckled down, tightening regulations around everything from foreign buyers and investor activity to taxation and anti-money laundering controls.

From soft touch to heavy hand

Arguably, New Zealand and Canada have now done an about-face and become heavy-handed where real estate controls are concerned. But as we’ve witnessed, highly regulated markets may still continue to be unruly, with price volatility, investment bubbles, low affordable housing supply and gaps in bureaucratic oversight and compliance.

We’ve had a bumpy ride. The same goes for New Zealand, poetically known by its Indigenous Māori people as Land of the Long White Cloud.

After a massive boom following the start of the pandemic and then an extended correction beginning in 2022, increased housing inventory levels are “keeping prices steady for now,” says Johnny Sinclair, national residential director for Bayleys Realty in New Zealand. Bayleys is the country’s largest full-service real estate company and has a strategic partnership there with global affiliate Knight Frank.

A different kind of market

Real estate salespeople throughout New Zealand are typically full-commission, with the prevalence of auctions in some regions being one notable difference between practices there and in North America, Sinclair notes.

Another contrast is that in Middle-earth — a nickname saluting the Lord of the Rings trilogy filmed there — marketing costs including photography, advertising and staging are generally paid by vendors upfront. And instead of a single national database like MLS, there are agency networks and various public property portals.

Agents — the term Realtor isn’t commonly used outside of North America — must be licensed and follow a code of conduct, transparency and documentation, with ongoing professional development. As elsewhere, excessive red tape is a regular complaint from salespeople.

“The biggest markets are in our big five cities, with Auckland being the largest, followed by Hamilton, Tauranga, Wellington and Christchurch,” says Sinclair. “Globally, the Queenstown-Lakes District also sees a lot of interest, given its stunning scenery.”

The housing affordability crisis persists, with median prices in Auckland averaging around NZ$1 million (about CAN$810,000) and Queenstown-Lakes at NZ$1.5 million, according to Sinclair.

Rents are out of reach for many as well.

Brain drain adds to fragile recovery

Despite cost-of-living pressures, the market is showing signs of stabilizing, observes the Real Estate Institute of New Zealand. But the recovery remains fragile. It’s not helped by the record-high “brain drain” exodus of Kiwis to other countries, particularly Australia, drawn by higher wages, a stronger economy and better career prospects.

One thing those on the move aren’t likely to find is scenery that’s more spectacular. The phrase “you’re never far from a mountain or lake” is a staple in New Zealand property listings. A land of fiords, snowy summits and emerald hillsides flecked with sheep, it consistently tops global travel polls as the world’s most beautiful country.

Actually an archipelago of hundreds of coastal islands, the bulk of New Zealand’s 5.3 million population live on the North Island — the country’s economic hub — as well as on the larger but far less populated South Island. There are more affordable housing options on the latter, which also has a cooler climate, as it stretches further south towards Antarctica’s otherworldly cliffs of ice.

Remote listings, helicopter tours and a famous sheep

The distances involved can be a headache for agents, especially those who specialize in selling remote high-country sheep stations. Helicopters and four-wheel-drive vehicles may be needed to tour these sprawling legacy properties. The buyer pool is tiny and sales can take years to be finalized. But price tags are often through the roof, making for lucrative payouts — as evidenced by the NZ$55 million sale last year of a 10 per cent portion of Bendigo Station, famous as the former home of Shrek, the sheep who became a global celebrity after somehow managing to evade shearers for six years.

A golden visa divides the nation

A couple of months ago the government rolled back a select portion of its foreign buyer ban to attract ultra-luxury investment, “creating a new opportunity for eligible overseas investors to buy or build high-value residential property in New Zealand,” says Sinclair. “Under the changes, overseas buyers holding an Active Investor Plus (AIP) residency visa will be able to apply for consent to purchase or build residential property valued at NZ$5 million or more.”

This “golden visa” program has New Zealand locals deeply divided. Some view it as a step backward that could continue to inflate prices and push home ownership further out of reach for the average person. Others write off these arguments as “tall poppy syndrome” — a controversial cultural norm Down Under wherein wealth and status tend to be distrusted, stemming from the idea that any poppy that grows taller than the rest needs to be cut down to keep the field level.

Like it or not, the AIP visa is placing New Zealand on the global map as a potential haven for premier investors, asserts Scarlett Wood, senior international business director with Sotheby’s in New Zealand.

In her view, the market benefits from long-term supply constraints and international appeal. “High net-worth individuals are actively seeking safe, well-governed environments where capital can be preserved and lifestyle elevated. Interest has not only remained strong but accelerated. The United States has emerged as a leading source market under this program,” she states.

“A new chapter continues to unfold for New Zealand.”

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