Economic commentator Bernard Hickey says New Zealand’s long-standing reliance on rising house prices as a driver of wealth and economic growth has reached a turning point, arguing that the country’s housing-focused model is no longer delivering the gains seen over the past three decades.
Speaking on the Notes from the Executive podcast this week, Hickey said New Zealand had effectively become “a housing market with bits tacked on”, with economic growth increasingly tied to residential property values rather than productive investment.
Hickey said strong house price growth from the 1990s through to 2021 encouraged New Zealanders to view property as the primary path to wealth creation. However, he argued that the combination of high debt levels, tighter lending rules and Reserve Bank restrictions on mortgage lending means the conditions that fuelled previous property booms are unlikely to return. “We bet everything on the house,” he said. “The game is over.”
According to Hickey, New Zealand’s economic performance has weakened since 2023, with GDP per capita flat or declining. He attributed this to decades of capital flowing into housing rather than businesses, infrastructure and other productive investments. He argued that the absence of a capital gains tax and limited incentives to invest through retirement savings schemes encouraged investment in residential property at the expense of other sectors.
Hickey said the Reserve Bank’s introduction of loan-to-value restrictions and debt-to-income lending rules had effectively capped the ability of households to take on more mortgage debt, reducing the potential for another major housing boom. While lower interest rates could provide some support, he said they were unlikely to recreate the rapid property price growth experienced in previous decades.
Hickey also linked New Zealand’s economic model to migration policy, arguing that strong population growth helped sustain demand for housing and labour. He said successive governments had benefited from increased tax revenue generated by migrants, while infrastructure investment often failed to keep pace with population growth. Hickey maintained that migration itself was “not the problem”, but said governments had not adequately invested in housing, transport, health and other services needed to support a growing population.
Hickey warned that high housing costs, expensive rents and limited opportunities were contributing to an ongoing outflow of New Zealanders to Australia. He noted that many younger New Zealanders saw better prospects across the Tasman, particularly following changes that improved access to Australian healthcare, education and citizenship pathways.
Looking ahead, Hickey said New Zealand faced a choice between attempting to reignite the property-driven growth model or transitioning towards an economy more focused on productive investment. He suggested the country remained in a period of uncertainty, with political debate likely to continue over housing, taxation, migration and economic reform in the lead-up to future elections.
