All the talk in auction rooms and open homes this year has been about first home buyers and landlords flipping from Fear Of Missing Out (FOMO) to Fear Of Over Paying (FOOP). House prices falling as much as 20% from their late 2021 peaks in Auckland City and Wellington City, and falling rents for central Auckland apartment have some people thinking in the moment that this is only the beginning of a deeper and longer fall.
Any market always feels darkest before the dawn, and in the moment, feels like it can only get worse (or better if you're a first home buyer or bargain hunter). This week's expected 50 basis point increase in the Official Cash Rate (which will only move floating mortgage rates) will darken that mood of the moment.
But it's worth looking over the horizon into late 2023 and early 2024 to see what underlying forces are likely to be driving the market then. Those forces are likely, in my view, to be:
- falling fixed mortgages rates;
- landlords and vendors celebrating a likely National victory;
- the unleashing of population growth through migration; and
- a weakening of new housing supply growth from its current peaks.
In short, prices are likely to have bottomed out by late next year and be set for a sharp rebound the day after the election result is clear. They are already showing signs of bottoming out around 15% to 20% below their late 2021 peaks in the 'bleeding edge' markets of Auckland City and Wellington City.
Auckland City and Wellington City house prices were down 17% and 20% in July from their late 2021 peaks, while all of New Zealand was down 10.9%. Those first-to-rise-and-first-to-fall markets and the rest of the country’s housing markets are set for strong rebounds from late 2023 and early 2024, if as markets and opinion polls currently suggest, mortgage rates are falling and there’s a National-ACT Government by then.
That rebound will likely be super-powered by the repeal within the first 100 days of the new Government of various new taxes on landlords, a freeze on housing infrastructure and transport investment and an unleashing of migration-driven population growth that softens inflation, drives down budget deficits and sucks mortgage rates ever lower.
Our economy is already a housing market with bits tacked on and has been for 20 years. The market’s ups, downs and ups again from 2020 to 2025 are set to extend that maxim to being: New Zealand's entire society and future is a housing market with bits tacked on.
Are we there yet?
The Reserve Bank and most economists have forecast falls from peak to trough of around 15% by the end of this year, with the most pessimistic seeing falls of around 20%. These figures suggest we’re about two-thirds of the way through that fall, with a bit more to go in places outside of Auckland and Wellington. But there are already tentative signs of a plateauing out in the bleeding edge areas such as Auckland City and Wellington City.
Interest rates have stopped rising, migration is restarting and many investors are becoming more hopeful of a change of Government late next year, which would see interest serviceability, ring-fencing and bright-line taxes repealed, along with a softening of expensive rules forcing landlords to make homes warmer.
The bottom line is first home buyers wondering if they should wait for prices to keep falling back to their pre-Covid levels should stop wondering. It won’t happen. Home owners look set to retain at least half of the 45% gains they saw in their house values between March 2020 and November 2021.
Cooling inflation, falling fixed mortgage rates and the now-likely reversal of the tax hikes on landlords mean waiting for prices to fall much further is risky.
The dirty not-so-little secret of this country
In my view, anyone who wants to buy their first home to live in and can financially manage it, should be very careful before choosing to ‘wait for prices to fall further’. Those who feared missing out in the frenzy of late 2020 and early 2022 when the Reserve Bank removed loan-to-value ratio (LVR) restrictions and printed $55 billion were right to panic. That FOMO may have been temporarily been replaced by FOOP, but FOMO will always trump FOOP in the long run.
Our society is hardwired to drive house prices to infinity and beyond. I have a rule of thumb I tell every young renter I see. It’s not financial advice. Everyone’s situation is different. It’s my long-held opinion on the political economy of house prices in New Zealand in the long run. That is:
- always, always buy a house to live in as soon as you can to ensure you have stability and control over your future, especially if you’re thinking of starting a family;
- do whatever it takes to get a deposit and the biggest possible mortgage your bank will let you have to get on the ladder so you too can get the leveraged and tax-free capital gains that median voting home owners depend on for their financial futures and to support their current lifestyles and small businesses;
- don’t wait for the ‘grown-ups’ to fix the supply shortages or change the tax rules to improve affordability, or for the ‘markets’ to restore sanity to housing affordability; and,
- don’t believe politicians or central bankers who say the authorities have the situation under control or suggest things will improve in a short enough time for you to sensibly afford a house for something like three to five times income, as was the case 20 years ago because prices would have to halve from current prices within a year or two to achieve that.
Why won’t the market return to a 2000s-type equilibrium?
That is not going to happen because neither the Government (of whichever flavour) nor the Reserve Bank would allow that. Also, the extra housing supply coming onto the market now would dry up immediately. The Government would get kicked out by the home-owning and mostly older median voters living in the outer suburbs of the big cities and in the smaller cities and towns of provincial NZ.
Their voting rates are almost twice those of young renters in inner city areas in general elections, and more than three times their rates in council elections, which in many ways are more important because they determine the extent of the housing supply response. This ejection of any Government allowing house prices to fall at double-digit rates is what we’re likely to see next year, and it’s why National is promising to repeal the various taxes trying to make rental property investing less attractive.
So what happens now?
As the Reserve Bank wants and has forecast, house prices will settle another five percentage points lower nationally through the rest of the year, and may have already troughed in Auckland and Wellington. If, as financial markets are now indicating, inflation is now under control and interest rates keep falling, there is a growing chance of a strong bounce-back in house prices from the day after a change of Government in summer of 2023/24, fueled by lower mortgage rates, a rapid increase in migration and a freeze of new housing infrastructure investment through councils, NZTA and Kāinga Ora’s build programme.
That new National-ACT Government will then repeal the property taxes, release migration restrictions and slash Government investment spending to ensure interest rates stay low, or even fall further.
A broken economy with bits tacked on
Everything in our political economy drives everyone (politicians, bankers, central bankers, real estate agents, mortgage brokers and newspaper editors) to protect the leveraged tax-free gains of median voters who own their own homes, and often more than one home.
New Zealand is a broken housing market with bits tacked on. That’s because those median voters’ financial and familial futures, let alone their feelings of self-worth and ‘tribal’ identification, are totally bound up in whether and where they own the house they live in, and how quickly they can then leverage up those tax-free and leveraged gains in equity to ensure they can continue to earn more money from their houses than their jobs or businesses, many of which are also dependent on those gains.
They feel they need to keep this housing market elevated and preferably continuing to rise at the rates of the last 30 years to ensure a comfortable retirement for themselves, and even more importantly, enough equity to help their own children into their own homes. There is no alternative that wouldn’t wreck those plans and force a change of life trajectory, career, investment approach and lifestyle.
I’ve said for more than a decade Aotearoa-NZ’s economy is just a housing market with bits tacked on. But the $500b-plus surge in house and land values through the first 18 months of Covid has strengthened that situation.
The Covid response made it worse
We also now have a society, a workforce, a political system, a financial system and a demographic trajectory for lifespans and population size that is dominated by our housing market. We vote to keep house prices and rents high. We vote to keep public investment low and population growth from migration high. We lend to profit from those investment preferences, and not to real businesses. We run our Government finances to protect the status quo of low infrastructure investment that keeps housing supply squeezed and ensures interest rates are the lowest they can be.
About half our kids are growing up in private rentals, with about a half of those in financially and physically stressed households where they bounce from one cold, mouldy and ruinously expensive rental to another just-as-debilitating rental or emergency housing situation.
This 25% cohort of kids bounce from school to school, hospital A&E to hospital A&E, and eventually ‘graduate’ into the workforce, often without the educations, life skills, familial support or physical health to be settled, productive and healthy members of society.
Surely there must be a way out?
In my view, the only ways the situation above might change is if:
- those median voters that determine general election results and that dominate council election results change their minds about wealth taxes to redistribute some of their unearned and leveraged capital gains into building infrastructure for housing and public transport investments that massively improve affordability and achieve our emissions reduction goals; and,
- there’s a substantial increase in political engagement and voter participation among young renters, especially those from Māori, Pasifika and first generation migrant backgrounds in Auckland, Wellington and Christchurch.
Both of these are unlikely any time in the next decade or two. Both National and Labour are committed to the 30/30 principle that blocks new wealth taxes or an increase in infrastructure investment that pushes taxes to GDP and debt to GDP above 30% of GDP.
So what should young renters do?
My non-financial and non-specific advice for people wanting to put down roots and start a family is that it makes sense to:
- save, beg, borrow, marry and schmooze your way to a deposit with the help of family, friends, Lotto, Bitcoin and anything you find down the back of the couch;
- do whatever it takes to get the biggest loan you can from a bank to buy the biggest bit of residential land you can, even if it’s connected to an apartment or townhouse of some kind;
- campaign, vote and argue with median voters (especially parents) to tax themselves and increase investment to change the situation above, at least until the very moment you get yourself on the ladder, and then your incentives flip to wanting ever-lower interest rates, housing supply restrictions and no tax on leveraged capital gains on land value appreciation.
For those without the time or inclination or belief that this is possible, the best hope of building a stable and prosperous future is immediately buy a one-way ticket to Australia and hope Prime Minister Jacinda Ardern is able to convince Australian Prime Minister Anthony Albanese to follow through on his promise to announce solid pathways to full Australian citizenship for New Zealanders in Australia.
For those looking for leverage in debates with home-owning family members and bosses upset about your migration plans, suggest to them that they make those tax and investment changes or they’ll have to watch their grandkids grow up on social media and via fleeting visits, or also move to the lucky burny country.
The blurry mirage of FOMO
But whatever you do, don’t kid yourself or believe others who say that you can afford to wait for prices to come back to meet you some time in the next few years.
FOOP will turn to FOMO quicker than you can might think. It all depends on inflation falling from its peaks and National-ACT winning the next election in their own right.
103 Comments
Yep - the artificially low cost of debt is exactly how we got into this mess.
If FHBs where smart, the would realise they have the market by the balls… and continue to stay on the sidelines.
It would make Wall Street bets look like a dry run.
And it’s the exact reason why the likes of TA etc are trying to create FOMO again for FHBs. They know that fresh capital is the lifeblood of any market.
That Bernard H is now doing it just illustrates how fragile a position the NZ market is in.
It’s happened so fast it’s starting to scare sane people.
For validation of this is there anyone mainstream media who predicted the falls to be this rapid? I can’t think of one (besides the prophet of course… who even I laughed at in Feb)
But the reality is we are now Teetering… Teetering… Plummet (the double entendre someone so cleverly wrote last week)
What’s going to stop it? People telling other people to buy?… when they’re clearly not doing so themselves?
On the current trend next year is a capitulation rather than bounce.
What about your morality, Fitzgerald? Call that into question, instead of the author's? It is always good to start with yourself. I remember snarky comments made by you on this forum, delighting in the economic pain of others. You are not the only one here, there seem to be quite a few leftist-minded people who are in the same spot as you: envy, sarcasm, delight in others' sufferings - destructiveness instead of constructiveness.
Regarding the topic of the above main article, I would recommend you read it carefully and perhaps take some of the author's advice onboard. That way, you may have a happier and wealthier life in the future and feel less inclined to make snarky and sarcastic comments.
I just don't understand why landlords can not see that the point of all of this is to limit the investment in housing. Sure its never been sold as that, bit all these moves, tax deductibility, brightline, healthy homes etc, read between the lines.
Waiting for a silver bullet in reverse in the form of the king luxon and the 7 knights of the house shaped table.
Take a hint, find something productive to do with your paper wealth.
do whatever it takes to get the biggest loan you can from a bank to buy the biggest bit of residential land you can, even if it’s connected to an apartment or townhouse of some kind;
Many of the FHBs who followed this advice in the past two years will be in a world of pain when they refix that mortgage this year or the next.
Considering the uncertainty about how high interest rates will climb (some are suggesting OCRs of 4.5% soon?) coupled with the cost of living rocketing upwards, I think I'll pass on taking this advice, thanks.
I've been following Bernard for a long time and I can understand why he eventually capitulated and joined the indestructable housing market narrative (NZ high house prices are what ... genetic now!?).
But it's also kind of cruelly ironic that he's rolled over right as everything comes to a head and the global cheap credit runway comes to an abrupt end.
The fact that they accidentally brought this about is a great achievement, but only goes halfway to negating the boom they also created.
Who needs paper wealth? I'm voting for whoever says they'll bring house prices down. The ridiculous assertion that homeowners need to create equity so they can lend to their children is also monstrous. Why not stop storing up our grain in storehouses and let the kids harvest some instead?
Hickey may be right here. It's a plausible trajectory. But it is making a lot of assumptions.
-I think the result of the next election is hard to call. National will get more votes than Labour, but may not have enough coalition backup to form a government.
-Assuming rates will fall... why? I guess if you believe inflation is going away that's possible. I don't see any relief to supply chain problems, energy production is still limited, et cetera
-more migration: a safe bet if National win, but not under Labour.
-weakening of new housing supply: the pipeline is slow, but if the gov't have the competence (which tbf is questionable) they're preparing to soak up the idle tradies with a massive dose of Kainga Ora work.
I think the weakest assumption is that rates must fall. That's more a global issue than a domestic one. We'll see.
Agree. I think the biggest problem is he has layered 7 or 8 predictions/assumptions, all of which are far from certain, and then attempted to present them as a concrete/certain outcome. It's almost as if he has tried to build a set of events that would get to a desired outcome.
But to then take this low probably outcome, and then attempt to essentially try and provide financial advice off the back of it, and tell people to leverage up to their eyeballs to buy the most expensive house you can? I'm almost speechless.
The current government has no shortage of capital for infrastructure. The tax take is higher than ever. Labour and the Greens have borrowed more than an extra $72,000,000,000 in the last two years. But the spending has not been targeted, and much of it has been wasted.
But this justifies the tax on our savings--on top of income tax-- that Bernard supports. The Left thinks governments always need more of your money to waste.
Ways to "get off your bum" without buying overpriced NZ real estate:
...work on your career. Save money. Buy gold. Buy international shares. Get your money out of NZ so OrrFool can't devalue it. Learn about other markets and other investment classes..... etc etc.
The world dosen't start and end with this stupid bubble.
There are too many assumptions going on in this opinion...
1. Mortgage Rates decreasing (opinion)
2. National winning Election (not yet confirmed)
3. National (if they win) reducing resource consent requirements (not yet confirmed)
4. Population growing through migration (currently net migration is negative) [source: https://www.immigration.govt.nz/about-us/research-and-statistics/statis…]
==Quote==
Prices are likely to have bottomed out by late next year and be set for a sharp rebound the day after the election result is clear
==END==
If an economist believes property prices will change this rapidly they need their head examined.
It's so easy to make predictions with 100 caveats attached to them.
This article is strange. It appears to repeat itself a couple of times and has a vibe of embittered resignation. It's a rant.
Perhaps these things may happen but I feel for FOMO to happen those interest rates have to come back pretty rapidly.
I don't think the current or any future RBG will be swiftly reducing the OCR to anything less than neutral, without the environment being recessionary. They won't be reducing LTV's or taking away the need for a 20% deposit.
So, quite possibly there is a chance it bottoms out next year, but equally it may continue to reduce, depending on what happens in the world. National might well get in but they could also continue to trip over themselves.
The reality is at this point in space and time only a fool would confidently make any prediction, and this doesn't bring any particular light on a very murky future.
Roger and David (Lange and the other one) started this (gst plus free market) but Helen really got it going with her high personal tax rates. The 39 percent tax rate pushed the middle class into property. The damage is well and truly done and cannot be undone. Unless there is high inflation with zero property growth for at least 5 years. IO you should not hope for that outcome as it will hurt the poor through higher rents, living costs and those who are savers
You still find this community in less affluent areas. The wealth effect has so many negatives, particularly around how we treat our fellow man.
Just my take on it but the housing price boom has made many feel far smarter and more important than they really are. There is a huge amount of entitlement on display in society.
This is why people will vote luxon, deluded self image of righteousness.
I’m not sure whether Bernard actually believes these heroic assumptions or if he’s more too committed to the “better things aren’t possible” housing bit.
- Who’s to say migration is going to turn around? Do people actually want to live in a unproductive low-wage economy at the end of the earth? (Full of people with an arrogant delusion that everyone really does).
- What if Luxon loses control to the YIMBY liberal wing of National, and Act, who want to deregulate almost everything to do with housing (except urban density).
- What if don’t somehow tame inflation without entering a reasonably large recession.
- what if a big macro shock comes out of China
- what if the public sentiment on housing as an investment doesn’t revert to that of 2021, having seen many FHBs’ equity get wiped out in a matter of months.
As that great Philosopher and Economist, Gnarls Barkley said of Govt. the attempt to ride the top of the boom wave as it broke, 'Bless my Soul, you think you are in control.'
https://www.youtube.com/watch?v=-N4jf6rtyuw
That was cynical Bernard, there is no political will aye - all hope is lost.
Just adding to your prediction - there well be massive increase to the government housing waiting list, prison population, unemployment, prostitution, crime- violence, drugs, theft, fraud, abuse. People living in cars or squating.
NZ is going to be far more depressing than it already is, with many more mentally ill. The next Kiwi generation will leave and be replaced with many poor immigrants who hardly speak English and so culturally different you'll hardly recognise home.
Bernie, I generally enjoy your prophetic opinion but this time, either you have been asked to stir up the commenters or you have had a few too many and wrote this piece late at night. I have no political bias but the Nats were extremely quiet during covid and offered nothing while Jacinda protected us all from the then unknown risk. Its better that we all pull together and dig ourselves out of this hole, as a nation and not squabble over the financial hole we're in. We all have a stake in the game to repay the $72 billion we have borrowed from our kids. I suggest we "rip the band aid off quickly" and so we can return to normal sooner. Team 5 million CAN show the world how to do it. What would Richie Macaw do?
Forget housing, it is a market and it will eventually solve itself. It is short term thinking.
The only policy which will save New Zealand long term is to invest in education such that we create a world class education system.
The other critical action we need to take is to increase the capacity of the health system with the goal being to cope with a future pandemic without lockdowns or at least with minimal lockdowns.
So far we have learnt nothing from this pandemic and therefore will make the same mistakes next time.
100% correct Roger - of far greater concern for the future of NZ, is our education system which is even more of a basket case than the housing market.
This is what is keeping real economists like Bagrie awake at night
https://www.newshub.co.nz/home/money/2022/08/cameron-bagrie-hits-out-at…
My advice to FHB would be to not listen to opinions from “advice” columns and rather do their own research and make their own decisions once there is more certainty in the market, both locally and in China/US. Give it 6months and see where things are heading then.
We should be ashamed of the state of the housing market, and lining young hard working people up like sacrificial lambs to our failing economy is a disaster waiting to happen.
First off I hope like hell you are wrong, NZ needs the housing market to become a benign investment vehicle.
Secondly, you assume too much...........
- Electorates around the globe have been departing normal behaviour for the last 3-4 years. Bojo, Trump, Macron's loss of governing vote are all real examples. Our parties are producing a race to the bottom in the next election. Ardern's run is coming to an end, Luxon is a characateur of a National Leader and ACT have some polarising policies that make them hard to accept in their entirety.
- Ukraine
- China
- Currency weakening as the FED charges on with hikes as does the EU
- Inflation is refractory for a wee while longer than you give it credit for
I wouldn't be too sure about National repealing the investment property tax changes. Tax bracket creep for salary earners is by far the biggest issue facing the middle class and is expensive to fix. There simply aren't that many residential property investors with big mortgages and the lack of fiscal wriggle room would suggest that a gift to them is well down the pecking order.
Hmm. Here's a few numbers to consider.
- $2b of new Investor Lending @ Interest only Jan-Jun this year (40% total investor lending) (RBNZ C32).
- Average investor loan size = $550k across 11,940 borrowers (Jan-Jun 2021 was $480k across 21,538 borrowers) (RBNZ C31)
- Existing IO lending decreased from $75b (peak) in Jun 2020 to $60b in Jun 2022.
- Over 40% of investor lending has been IO going back to 2015 (when the series began) where it was 54%.
This downturn has only just started, house prices will continue to fall rates will climb, inflation will stay way above 2% for a number of years and if RBNZ lower rates before inflation is under control the NZD will crash. The government and the FED have to put some backbone into currency or we will fall into hyper inflation. People are starting to realise no soft landing is coming and lowering rates and printing more money is just pushing more debt onto future generations.
Yeah I agree. The recent expansion of the NZ monetary base from 15->60 billion already implies 10 years of 14%pa inflation. That's not even taking into account cost push inflation from supply constraints or possible devaluation of the NZD which makes it a double maybe tripple whammy. RBNZ will have to keep interest rates just high enough not to crash the housing market. House prices may go up in nominal terms but it'll be less than inflation. The next 10 years wont be like the last. That’s my guess.
Yes. The funny thing is when articles like this are published and people rush out early and spend in the belief good times are back. Demand spikes again, wages go up, inflation goes up, building costs go up and guess what interest rates keep on climbing.
For some reason people seem to think that if inflation falls to 6% then (because 7% was the peak) all is good again. Guess what... rates will go up and up until inflation is back at <3% AND every time rates drop a bit or go flat and demand surges too soon.. then the rates will stay put or go up again and the surge will stop again.
Best is for everyone to stop wage increases, stop tax cuts, limit immigration, stop talking house prices up, limit spend until inflation is back in its box. Any talk of things going back to a boom early is counter productive and will likely prolong and deepen the downturn.
Not going to happen mate, people cannot pull their heads in these days its "Want,want,want" . If your honest pretty much everyone is living beyond their means, even if its not monetary terms "Because I can", its planetary terms.I'm just another case in point just sitting here tapping away living solo in a huge 3 bed house.
A provocative piece which rests on several questionable assumptions. Perhaps the biggest one is that RBNZ is autonomous in setting interest rates. Technically it is, but in the real world it is not. Rather, RBNZ takes its cue in setting rates from the US Federal Reserve. If it cuts rates when the Fed raises them, the NZ dollar will crash and the current inflation rate will seem like a walk in the park. Needless to say, in setting interest rates the US Fed does not consider NZ property values.
Maybe because the lack of affordable housing has led to a rise in homelessness, hopelessness and crime whilst enriching a few, who were lucky enough to receive free money (leverage) from the bank and tax breaks from the government. National and Acts housing policies are the reason I can’t vote for them. I count myself as a floating voter and I own my home.
A lot of those commenters are looking to get rich fast so they discount property and home ownership as a vehicle. Over the long term however property is more stable and then they realise suddenly that the cost of the house they want is out of reach. Being fussy and disaffected they don't like the look of what they actually can afford so come on here to complain and whip up a storm. They generally do not admit they are in the do-dos because of their own choices and preferences. However it is always someone else who is responsible for their situation and well-being. What a sad bunch we have become
All well and good until housing becomes out of reach for the majority of a nation, new money dries up and then you get articles like this one, pleading with the FHB to come back with their money.
I think this nation will get a bit sadder before things turn around again. Already evident in the comments section here with the amount of finger pointing going on.
"A lot of those commenters are looking to get rich fast" - sounds like you are projecting yourself onto others. "They generally do not admit they are in the do-dos because of their own choices and preferences." - sounds like you are deflecting your own contribution to the problem. There are plenty of people who are forced to rent, not of their own choice or making.
WTI at 87.55 Brent at 93.34
Oil prices trending down reflecting demand falling off. Partly seasonal, partly demand destruction.
Copper down.
China real estate not being resolved. Europe facing industry reduction due to rising cost of all energy inputs.
At a certain point this turns deflationary not inflationary. Interest rates can be cut as quickly as they have been pushed up.
All the 'beta trash' has been rising lately. High risk assets don't rise in price if people think that the interest rates will continue to rise.
Can you feel the turning of the tide?
2% interest rates is peak liquidity and i dont see us going back to that any time soon unless theres another black swan event.
Even if interest rates dont continue to rise, just looking at pure borrowing power the demand isnt there to warrant a return to FOMO prices like in 2021
8.5% US CPI is still pretty high and quite a bit away from 3%..
From what I understand the extra supply of money isn't being removed, it's become more expensive, for now.
The building industry is about to crash spectacularly, leading to the unemployment spike the RBNZ wants to see.
Inflation has created a replacement cost floor. A keith hay homes "cheapie" product was quoted to me at 400k the other day. That's before the new insulation and window standards kick in.
And wages are going up in fits and bursts. Those will never go back. Once wages rise the affordability of everything rises too.
I get it that we all want a utopian society. But I think the economic decline from young people leaving, not offset by new people arriving, is both a silly way to go about it and it is also temporary. There are a lot of people in this world who will compare NZ with their own basket case and be keen to make a fist of it.
I agree a bit with the writer but mostly because all the money printed is still out there.
Good article Bernard and good non-advice advice :) even though it will undoubtedly upset many proliferous posters on here who are adamant house prices must, and will, collapse so catastrophically they will become perfectly affordable for everyone without needing any hard work or sacrifices (like we all had to) and remain that way forever.
However their view is understandable considering a certain political party in 2017 promised to solve the then so called housing crisis by building 10,000 affordable homes a year and saving the youth from high house prices forever.
In respect of your view;
Our society is hardwired to drive house prices to infinity and beyond.
It's probably the result of property proving, for as long as history records, to be a successful and significant LONG TERM asset that has provided wealth creation by default (just ask your grandparents or great grandparents) and a comfortable retirement whilst providing one of our most basic needs, a roof.
Is spite of property values having their ups and downs at times (and sharp ups and downs are always incorrectly interpreted as going to last forever... 'i.e. recency bias') if you take a long term view (and you must when talking about the biggest and most essential asset most people will ever own) it's a no brainer... unless of course you are either bitterly envious or a 'brainy youngster who knows better' but really who simply cannot yet comprehend the property markets long term movements.
They do not appear to understand the fact our economic model is an inflation based one. So incomes inflate over time and the price of a building houses increases with that model by default too whilst at the same time inflation deflates the purchasing power of money and so by default reduces the value of debt.
Of course we are reminded it's all the fault of those greedy speculators, oh i mean landlords, oh i mean mums and dads providing for their retirement, but is it really?
If anyone deserves blame perhaps it's all those 'greedy' upgraders who may be to blame. They are the largest percentage of property purchasers (based on mortgage lending they are borrowing over 60% of all mortgages each month) so they might be the main culprits who will pay over the odds for their dream home and insist on a high price to sell their previously modest first home therefore pushing up the value of all properties. Why cant these 'lifestyle greedy' people just stay in their modest homes and not upgrade? Because peoples incomes improve over time as their experience becomes more valuable, their relative mortgage debt becomes more manageable so much so that they can afford to upgrade and pay more for their desired better lifestyle, and let's face it everyone wants a better lifestyle.
Of course one day the 'brainy youngster' will understand when they are on the other side of the fence as property owners sitting on their prized wealth in the form of property with what will then be only a 'small' Million dollar mortgage whilst being accused of being greedy 'old Millionairenials' or 'old GenZgeezers' by the latest batch of bitterly envious and/or 'brainy youngsters' who will be complaining whilst residing in the comfort of their parents upgraded home... or one day set to inherit part of it.
Admittedly it's not the brainy youngsters fault they are missing some crucial history and life experience and in some cases lacking financial literacy. They would do well to up skill their financial literacy with some good unbiased history lessons on the economy and housing markets or they could just ask their grandparents.
You are surely taking the piss.
Financial literacy is staring at the current economic environment in the face and saying to "youngsters" buy buy buy?
I'm not even going to open homes until I see a FED pivot with my very own eyes.
There might not be a capitulation but a 20~30% discount is very much on the books
The investors who bought 2 bed units for a whooping 1.2M can puke it. Love to see it. I wonder how "financially literate" they are.
I guess if you take such a narrow viewpoint you are bound to come up with a black or white outcome that may be 100% correct, or 100% wrong.
There's a shed load of stuff happening around the world that is going to have a far bigger (think orders of magnitude) impact on NZ house prices than whether Luxon gets in and sets the hamster spinning again.
And in my viewpoint, none of it looks promising for NZ house prices.
(Which by the way will never increase all the way to infinity and "beyond", what a stupid statement - at some level house prices become unaffordable for all. Interest rates cannot keep decreasing forever, even if money supply grows exponentially.
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