Is moving to Australia to buy a home really cheaper than buying in New Zealand? Work out whether it is worthwhile first!

For years, many immigrants to New Zealand have considered moving to neighbouring Australia after gaining citizenship, as wages there seem higher and house prices cheaper than in New Zealand. Just two weeks ago, the Australian and New Zealand prime ministers jointly announced that, from 1 July 2023, New Zealand citizens who have lived in Australia for more than 4 years will be able to apply directly for Australian citizenship without first applying for permanent residency. The announcement has brought this debate back into the spotlight, with seemingly more New Zealanders suddenly contemplating a move to Australia in the hope of enjoying better living conditions than in New Zealand.

 

Some may therefore ask: Is buying a home in Australia really cheaper for New Zealanders than buying in New Zealand? Experts say, “Not necessarily.” Experts caution that although Australian wages are higher, mortgage payments still account for the largest share of people's living expenses, just as they do in New Zealand. New Zealanders commonly move to Sydney, where housing is expensive, but homes in Adelaide, the capital of South Australia, and Perth, the capital of Western Australia, are much more affordable than those in the major cities. It is much like New Zealand, where Auckland housing is very expensive but Christchurch is more affordable. Experts also urge those considering a move to Australia to keep the following points in mind:

 

Comparing rental markets

 

Rents are high across much of Australia, and news reports frequently criticise the shortage of rental properties. Adelaide, for example, is among Australia's cheapest cities for property, with a median house price of A$709,829, which is NZ$199,143 below New Zealand's average house price and NZ$549,143 below Auckland's average. Yet Adelaide also has the lowest vacancy rate of all the state capitals, at just 0.3%, meaning there are virtually no homes available to rent.

 

Australia is also experiencing an influx of migrants similar to New Zealand's, which will make the rental housing shortage increasingly severe.

 

Australian rents are currently rising at an annual rate of 19%, with Sydney's average rent at A$756 a week and continuing to climb. According to Tenancy.govt.nz, the median rent for a three-bedroom apartment in central Auckland is NZ$750, while the median for a three-bedroom house is NZ$805.

Rental homes are hard to find in Sydney

Comparing home-buying costs

 

Westpac New Zealand's current one-year mortgage rate is 6.79%, well above the 5.54% one-year fixed rate offered by Westpac Australia. This means lower mortgage costs in Australia, potentially saving home buyers thousands in bank interest. However, buying a home in Australia attracts stamp duty: a property costing around A$1,000,000 incurs A$44,000 in purchase tax, whereas New Zealand has no such tax.

 

Last Tuesday, the Reserve Bank of Australia announced that it was raising its official cash rate (OCR) to 3.85%. This was increase number 11 since it began tightening monetary policy in May last year.

2019–2023 Australian and New Zealand OCR comparison chart (Source: Reserve Bank of New Zealand)

 

Wayne Shum, senior research analyst at OneRoof's data partner Valocity, said inflation was currently high in both countries, and both central banks were raising their OCRs to curb it. Over 18 months starting in late 2021, the Reserve Bank of New Zealand raised its official cash rate from 0.25% to 5.25%, while Australia raised its official cash rate from 0.1% to 3.6% over 12 months starting in May last year. Compared with New Zealand, Australia's interest rates have risen more slowly and over a shorter period, so the impact on debt-servicing capacity has been smaller.

 

Lending restrictions under the CCCFA continue to hold back some prospective borrowers in New Zealand. Despite Australia's recent interest rate increases, New Zealanders generally face greater pressure in meeting mortgage payments than Australians.

 

 

Comparing wages

 

Although unemployment is low in both Australia and New Zealand, Australia's median annual salary is higher, at close to A$80,000 (about NZ$85,000), compared with just NZ$61,000 in New Zealand. While New Zealanders can earn more by moving to Australia, Ray White chief economist Nerida Conisbee pointed out that Australian house prices have begun rising again, while New Zealand prices are still falling. This means New Zealand may currently be a good place to buy a lower-priced property.

 

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According to Neoval, Sydney's median house price reached A$1,557,000 last month, considerably higher than Auckland's. Auckland housing, however, is much more expensive than housing in south-east Queensland. The Gold Coast and Sunshine Coast have median house prices of A$1,100,000, while Brisbane's median is A$800,000. Conisbee said New Zealanders would find it easier to get work in Brisbane because of its substantial labour shortage. Those wanting to settle in Sydney, however, would need to move further from the city centre to find comparable house prices. In Blacktown, for example, 34 kilometres west of the CBD, the median house price may be only just over A$1,000,000, but crime rates there are also high. For those wanting to live near Sydney's beaches, prices could jump straight to A$3,000,000–A$5,000,000.

 

Conisbee also warned that people might struggle to find a good home at an affordable price in Sydney, even on a high salary. Nor should they expect their food bills to halve after moving to Australia: just as recent flooding has pushed up New Zealand food prices, Australia also experiences floods. Meanwhile, CoreLogic's Asia-Pacific research director Tim Lawless believes Australian house prices are indeed cheaper by comparison, but he also cautions that cheaper does not mean inexpensive.

 

 

Lawless also advised anyone considering a move to Australia to look at cities such as Brisbane or Perth. Perth's median house price is half Sydney's, and its economy is strong. The drawback is that Perth is on the other side of Australia, a very long way from New Zealand.