There are three key factors above all others which explain house prices rising near 150% while average wages have risen by just 33%. First, because of the 2008 recession and then the Global Financial Crisis (GFC), house construction in New Zealand fell to the weakest levels since the 1960s by 2011.
Second, net migration boomed right after this collapse in house construction courtesy of a net migration surge from 2014 adding an extra 390,000 to the population – a boost of about 8.6%. Our population has grown some 18% since 2012.
Third, interest rates were slashed in 2008 to fight the effects of our recession and then the GFC. When growth in the economy picked up, inflation failed to appear as expected. Reacting to this the Reserve Bank had to cut interest rates further and even before the global pandemic started the official cash rate had fallen to 1.0% from the 2.5% it was cut to for fighting the GFC.