Property prices are so high in New Zealand that even homes that are abandoned and falling apart have seen their price surge.

Well known for its Covid resilience, along with the stunning mountain scenery, the beautiful people and the modern cities, New Zealand now has a reputation for one of the least affordable housing markets in the world.

Femke Burger, who works as a real estate agent, describes it as “cruel”.

The experienced 32-year-old case manager has been looking for a home in Wellington, the country's capital for 10 months, often competing with up to 100 other people at public viewings. She saw about 60 properties, but she had to make several attempts at finding a property that was both affordable and attractive. During that time, she had to compete by raising her asking price NZ$700,000 ($493,000) four times just to stay competitive.

“The expense of that I have suffered over the past ten months can be calculated as close to NZ$150,000. I find it hard to comprehend. It's unbelievable,” she remarked. I'm making a total sacrifice, everything I own — no savings will be left and this is terrifying.

An updated report now places New Zealand among the most expensive housing markets for income among all other countries in the OECD. Auckland is where you’ll find a third of New Zealand’s population! It’s an exciting city full of vibrant culture. It is also the fourth least affordable city in the world, according to urban planning consultancy Demographia. So don’t expect to find an affordable apartment there!

Many people are worried that the prices of houses have exceeded what a reasonable buyer would be willing to pay. The property market in New Zealand has surged over the past year, with the national median house price rising more than 20%, to NZ$780,000. In Auckland, the surge has been more dramatic; the median price has reached NZ$1.1 million.

It’s easy to see why so many investors are flocking to buy-to-let property. Low borrowing costs and high demand for rental homes mean the market is in full swing. Property prices are hitting new record highs. The rise is fuelled by the ultra-loose monetary policy that has sent borrowing costs to historic lows. Global values are rising, but New Zealand, which defeated Covid-19 and prevailed earlier, will emerge as a trigger of the rise.

Every week seems to bring new stories of people paying for a house that is larger or more expensive than they actually need. A 3-bedroom bungalow, which is located in the Greenlane suburb of Auckland had its valuation set at NZ$2.6 million but sold for a staggering $5.98 million at auction in March, this year according to OneRoof, a real estate website. 

Old dilapidated houses, also known as “dungers”, are a hot commodity in New Zealand right now. Auckland property owners got a wake-up call earlier this year when a derelict “slum house” located in the suburb of Avondale sold for NZ$1.4 million. 

The country's new prime minister, Jacinda Ardern, who campaigned on improving economic equity, is facing growing calls to maintain control of the housing market so that new and first-time buyers can afford homes.

For decades, it has been a cultural rite of passage to own a home. But new data indicates that homeownership is at its lowest rate (65%) since the 1950s. The average homeowner is 14 times richer than the non-homeowners based on government figures.

Kathryn and Blair Duckett, a couple from Wellington feels left behind because they're struggling financially. They managed to save the 20 percent mortgage deposit while raising three boys and paying rent for living in a good school neighbourhood.

Blair, a 46-year-old surveyor asks, “How did I save NZ$200,000 for a deposit and still have money left over? "We'd have a house years ago if we didn't need a deposit. We've never skipped a rental payment, we can serve a mortgage."

Kathryn, 47, says she chose to put the education of their children ahead of her house purchase, although she still hurts to make that decision. It's not a shame to tell people that we are renting," she said. "People say that it's too late.

According to Infometrics, the median house price is now 6.7 times the yearly average. In order for economic consultancy to return to the affordably high number of about three, house prices will have to fall 55% or household income would have to rise by 123%.

To help first-time buyers and investors who have long experienced tax cuts and are therefore willing to over-excuse newcomers, the government has begun implementing a series of steps.

However, the extent of the issue is awful.

In February, Finance Minister Grant Robertson handed over a part to the central bank of responsibility for moderating house price rises and forced it to give greater focus to the real estate sector in setting monetary and financial policies. This will allow for the imposition on investors of more macro-prudential controls, such as debt-to-revenue and interest-only loan caps.

Ardern then pushed down tax rules last month that promoted speculative investment in residential land. Investors will be phased out and the length of time for taxing their income on investment property is expanded to 10 years out of the five years in order to reimburse their mortgage interest as a tax deduction.

Kelvin Davidson, a senior economist at property research company CoreLogic, said the measures are unlikely to have much impact on prices in the near term given the weight of demand. He said, "A slow-down in sales is what we foresee, not so much activity, just slower rates, not falling."

The New Zealand Investors' Association has rejected the reforms and said that they are reducing rental supply and increasing rents as landlords attempt to recover extra costs. The real problem is a housing shortage, he said.

Brad Olsen, a senior economist with InfoMetrics said,  "The situation in New Zealand will need to see a long period of high building levels to tackle housing under-supplies in the context of the housing crisis. "A significant start to resolve housing issues is the government's housing framework; however, more is required to make land available for more homes."

In the government steps for them, the Ducketts see nothing. "It's a tease," Blair said. It's a tease. "Again and again, you get your dreams and then they get smashed. And you just give up finally."

Yet Femke Burger has reached a happy ending with her long and painful house-hunting adventure. The NZ$825,000 bid was accepted last week for a two-bedroom, semi-unit.

"I eventually spent far more than my initial estimate, and I finally bought something I wouldn't have thought of at first," she said. "Some big compromises have been made, but I'm still excited."

For more information about the New Zealand property market, mortgage rates and range of useful mortgage calculators visit https://mortgages.co.nz