Minister for Housing Chris Bishop says he wants to see average house prices continue to fall even if it makes existing homeowners nervous.
Speaking at a press conference on Monday, the senior coalition government minister told reporters housing was too expensive and prices needed to fall.
This is rare rhetoric for New Zealand politicians who have traditionally been reluctant to suggest real house prices should decline. In 2016 the then-Greens co-leader Metiria Turei caused quite a stir by saying Auckland house prices needed to slowly drop about 50%, bringing them down to three or four times the median household income.
In 2020, then-Prime Minister Jacinda Ardern said she would like to see small increases in house prices, as most people expected the value of their biggest asset to keep rising.
Despite leading a government elected partly on its promise to make housing more affordable, Ardern was only willing to say she wanted “sustained moderation” in house prices.
Bishop blew that language out of the water this week, saying the average house was too expensive and his government was working to make them more affordable.
When asked directly if he thought house prices should fall, the minister answered: yes.
“We want housing to be more affordable for New Zealanders. That is a major work stream for this government — average house prices in NZ are too expensive,” he said.
“The flipside of house prices falling for people who own homes, is that they become more affordable for people who don’t own homes”.
There was an entire generation of people who had been locked out of the housing market because average house prices had been allowed to get too high.
High prices and Reserve Bank loan to value ratio restrictions make it very difficult for new buyers to pull together a deposit to get onto the housing ladder.
He acknowledged that a consequence of aiming for lower average house prices might mean existing home owners feel “a little bit worried”.
“But they also have, in many cases, children who are desperately trying to get on the housing ladder and can’t right now,” Bishop said.
House prices in New Zealand had risen faster than in any other OECD country over the past two decades and his government was not going to let that continue.
“I wake up every day determined to try and improve housing affordability in this country. That is my driving mission in politics,” he said.
Current conditions
Housing unaffordability hit a record in 2021 as ultra-low interest rates and the Covid-19 pandemic pushed prices up to unsustainable levels.
Median prices have since fallen more than 16% from that peak, according to Real Estate Institute of NZ data, but are still roughly 25% above pre-pandemic levels.
Affordability has improved a little as prices have fallen, see interest.co.nz's latest Home Loan Affordability Report here. Mike Jones, the chief economist at BNZ, expects it to “drift sideways” over the next two years.
While he still sees some improvement, his forecasts don’t predict affordability will return to pre-Covid levels unless household income growth continues at 7% while house prices freeze.
Fresh REINZ data, released earlier on Monday, showed the national median house price had fallen to $770,000 in May and was down 1.3% in 12 months.
The REINZ's House Price Index, which adjusts for different kinds of properties sold each month, showed prices across the whole country had declined 2.9% in the past three months.
Jones has forecast house prices will rise just 2% in 2024 before returning to near the long-run average at approximately 5% in 2025.
229 Comments
Don’t think you can talk house prices down anymore than you can jawbone any market down for heavens sake. The article mentions previous PM Ardern in the same mode and it was even more unfortunate, in that sense, that she admitted she had only become aware house prices has risen dramatically when the property across the road from her, sold. Sometimes you have to wonder, including Mr Bishop right here, whether politicians have any attachment to the lives and experiences nonpolitical New Zealanders have to encounter.
"How Jacinda Ardern primed New Zealand for a catastrophic house price crash
Leftist policies have left New Zealand's housing market on the brink of disaster"
https://www.telegraph.co.uk/money/property/how-jacinda-ardern-primed-ne…
Pretty unfair heading and the actual article is more balanced than the heading suggests.
I came to despise the last government, and while they did a couple of things that really backfired in terms of housing, it was the RBNZ’s decisions that had the biggest impact by far.
The biggest cultural cringe, more like cultural fingernails on a blackboard, are UK expats (typically morbidly unhealthy &/or overweight) who moan incessantly about all the things that need improving here the moment they step off the plane.
A nation of self-proclaimed subject matter experts... on every subject.
I'm English and work intimately in the areas of type 2 diabetes and cardiovascular health. I can very confidently say that rates of ischaemic heart disease and type 2 diabetes are higher in nearly every ethnic group in NZ than Europeans (I'm equating English with Europeans). Asians tend to be underrepresented.
Your assumption is baseless and emotive.
Your opinion of UK govt is echoed by myself and every single Briton I've met since I arrived on holidy. However judging by the local Tesco supermarket in a poor area of Bradford they suffer from cheaper prices and better cars. Personally I couldn't handle the sheer number of people (experienced in East Anglia, London suburbs, outer commuter belt, Merseyside and currently Yorkshire) and so I will return to home in NZ. But most young Kiwis would be better off and better entertained (Taylor Swift is willing to tour Briton) and likely have a better future if they emigrated to England.
Well I'm working on a property here in NZ with my top off in 17c sunshine in winter. Try that in Yorkshire in January.
Your point is well made, however it's not NZ that is the problem, it is the people that have been running it and increasingly Ardern's legacy is one of catastrophic incompetence. If I were you, I'd spend summer in the UK and the rest here.
I've just spent 4 weeks in the UK, and it was great. Stayed in Maidenhead, which is a lovely town just outside of London, and could go direct to the centre of London (Tottenham Court Rd) in 40 minutes on the new Elizabeth metro line. Lots to do (countless shows on in London), good food, good beer, and lower prices. Traffic in London is fairly light due to the fees you pay to bring a car into London, and the transport system (in particular the London Underground) is excellent.
I visited the UK and my biggest shoick was the bubbling aggresion there . The Irish troubles, the out of control youth gangs, the furtive way the old act - just awful. I used to hate going to the supermarket in Luton because of the gangs of surly 18 yo's shaking down people or just doing their best to humiliate them...... I was astonished......in NZ it had never happened to me in a lifetime. Thinking about I rather think the Maori culture has permeated here - respect for the elderly etc.
"How Jacinda Ardern primed New Zealand for a catastrophic house price crash
Leftist policies have left New Zealand's housing market on the brink of disaster"
The current house price falls is likely a consequence of a key policy decision in late 2016. For nonpartisans, refer further down in thread.
Oh c'mon... Take the blinkers off. The previous National govt were elected to rule in 2008 after promising to address housing affordability. Instead we got "rockstar economy" and "great problem to have".
The disaster was allowing homes to become financial assets and financial investments.
The "Housing Market" wasn't even a thing prior to the 2000's, same as the "property ladder" wasn't a narrative. Allowing the housing market to be another too big to fail is the disaster.
2120 properties listed on Trademe with the word 'motivated' used in the advert - motivated vendors, motivated sellers, our vendors are motivated to sell etc
https://www.trademe.co.nz/a/property/residential/sale/search?search_str…
The time to sell was yesterday
https://www.trademe.co.nz/a/property/residential/sale/southland/inverca…
Now that the brightline is 2 years, this is the opportunity for you to get onto the investment ladder. This is a no-brainer investment, why?
Sounds like a Freudian slip on behalf of the vendor to me. More like, now that the brightline 2 years, our vendor that purchased in 2020 can now sell their "pathway to high returns" for tax free capital gain as was always the intent.
Real estate agent targeting house price extrapolators with these comments in the marketing materials.
"Did you know the Southland Property Capital Growth has risen 316.761% in the last 20 years? This is the highest percentage in the country. First home buyers, here is an opportunity for you to get into the property market. Make your move and get into Investing in Southland, don't think about the current value, think about the future value."
Owner occuper buyers: CAVEAT EMPTOR
He could stop immigration.
Solved.
But in reality, he has been handed the poisoned chalice just as the whole shebang is hitting the wall.
https://onlinelibrary.wiley.com/doi/full/10.1111/jiec.13442
On the way up, we could specialise, and we could commandeer parts of the Commons. That made what was once free, and once do-able by owner-builders, monopolies.
Now, the whole edifice bas built that in, but GROWTH has ceased - and increasingly, those icings on the cakes will be divested. Environmental restrictions, rules of all sorts. Also, the enforcement costs are increasingly prohibitive; council rates will never again go below inflation - until the system collapses.
How lovely of all of our parents to demand low rates, allow infrastructure to crumble over the last 30 years and haul off all the profit that was supposed to be for maintenance and upgrades. What a time for them to all retire and live the good life, but for the rest of us the new mantra is "PAY UP".
A mate is not allowed to put a granny flat on his small rural LSB 5000sqm without a 'highly productive land' report from an 'expert'. The result of labour's national policy statement end of 2023. Will cost 10k-20k for resource consent assuming it goes through first time. Council can stuff him around and do notified consent if they want... then will cost 100-200k. The funny thing is that the property mostly grows weeds, one photo should be enough
Congrats to the coalition, they're on the right track.
Spot on their Flying High. All those Auckland City Councilors who have voted for the status quo of not allowing the urban/rural boundary to spread out are the culpable ones. Like the developments down below the Bombay Hills there is no substitute for greenfield (or brownfield redevelopment land) for being able to create hundreds of good affordable family homes. When I review land holdings in the near north above Albany it is evident by the surnames (not people native to that area) of so many of the 10 to 20 Ha blocks that there is land banking going on just waiting for their time to come. You could build 1/2 million houses up there between Helensville & Orewa over time. Then comes the opportunity to build rail to commutte them into the city. Not that hard on a world scale of doing things.
"When I review land holdings in the near north above Albany it is evident by the surnames (not people native to that area) of so many of the 10 to 20 Ha blocks that there is land banking going on just waiting for their time to come"
How long will they be able to hold on?
Seeing reports of some landbankers in need of sale. Some are facing mortgagee sales.
I agree, on Housing Bishop seems good. He's consistently been pro housing reform, he was involved in putting the MDRS together as far as I know. His decision to approve Wellington Council's upzoning against the independent panel sort of indicates he's serious about it. I mean he should be, housing has been the biggest issue (with climate change) facing New Zealand in the last few years.
The Climate Movie debunks the climate change scam pretty comprehensively.
just for laughs, go back and watch Al Gore’s histrionic “An Inconvenient Truth” and laugh at how none of the predictions Gore postulated have come true.
of course, the climate cult continually push the predictions out.
but if the “science is settled” why can they never accurately predict a single thing?
the sun and milankovitch cycles have far more impact on what earth does than a trace gas which is beneficial to life. Humans are living in a geologically cooler period.
Ah, a climate cultist.
Were you aware that the hundreds upon thousands of climate funded “research” required researchers to state the effects of whatever on anything was due to “climate change”. That’s the “consensus”. Basically nothing more than the IPCC buying agreement on the scam by tying Funding to being required to say “climate change will impact this”.
its an absolute scam.
should have become evident to most logical people by now when “the science is settled” cultists continually fail to explain why their predictions from 2006 that were supposed to take effect now still haven’t come true.
Careful what source you trust James, the organisations that benefit from climate change denial pay lots and lots of money to try to undermine climate change.
https://www.desmog.com/2024/04/05/institute-of-economic-affairs-iea-thi…
I prefer to trust well settled science from scientific books relating to climate science published between 1940-1975 which discuss the cyclical effects of earth’s cooling and warming cycles, that co2 level lag temperature increases and that the earth is still midway through a cooling cycle with no foreseeable noticeable increase to temperatures expected. I mean, it’s easy to make the temperature records from weather stations close to cities appear catastrophic by exponentially scaling the Y axis.
better to rely on pre-bias books instead of dubious methodologies published online with IPCC “you must say that climate change is the cause” funding.
fwiw, I was right into the climate change scam after AIC was released but the ever shifting timeframes and the sole focus on CO2 as the demon gas to the absolute absence of anything else, coupled with precisely 0 of the IPCCs predictions coming true, along with the University of East Anglias claim that nobody would know what snow was by 2020, turned me from a believer into a non believer.
the only thing I believe is that there is too much plastic waste. Everything plastic can be made from hemp. Perhaps when NZ or Australia grow up enough to legalise marijuana, perhaps Rio Tinto’s defunct smelter can be repurposed into a hemp production facility to get the world off plastic products and into hemp products that are all natural, biodegradable, and store food just as effectively in cheap chinese takeaway containers. Might have to buy a few more hemp containers throughout the year but as a readily renewable resource (which relies on CO2 to grow) it shouldn’t be too expensive to replace them.
I also like to read pre galileo texts on how the earth is the centre of the universe. But for entertainment rather than the science.
Maybe go outside and look at a glacier and compare it to where it was decades ago. That might make you think twice that we are "midway through a cooling cycle", which is utterly hilarious. You can literally tell its getting hotter and hotter every year, almost everyone can recognise it, fascinating you can't.
well settled science from scientific books relating to climate science published between 1940-1975
So you don't read anything past 1975? How much of a magnitude of technological advancement greater body of knowledge do you think has occurred since this period? By this standard you may as well take up smoking a pack a day, use a CFC fridge and inhale petrol to relax you in the evenings.
Sorry but no. When climate science as it presently is today has already decided there is only one factor that matters in its hypothesis, leaving absolutely no room for anything else, it’s not a science, it’s a cult.
Science written prior to James Hansen’s scam is still far more cogent than anything written today and doesn’t write off any other factor as todays climate cultists do.
fact: temperatures have been much warmer in the past than they are today, all during the modern 10,000 year existence of what we consider civilisation to be. Egypt was far warmer during the age of the pharaoas.
Of course, the IPCC don’t want you to believe that.
Why would anyone want to support government funded lies? There seems to be a few people that vociferously encourage people not to believe what their government says, but encourages people to believe the government funded intergovernmental panel of climate cultists.
Not a single prediction since Hansen started this scam has come true. Not a single one. That is the definition of a cult.
My goodness cult followers write a load of drivel.
You think relying on scientists (you know - the guys who took us to the moon and onwards to Mars) is cult worship?
I suggest you look in the mirror (take off your MAGA cap so you can see clearly) and you will see a cult follower.
It is cult worship when there is no debate. Just like the transcult.
I am far from a maga follower. Left leaning liberal tyvm.
I just don’t consider the arguments against CO2 particularly strong and the supposed evidence proffered fails to be borne out in reality.
I know right, where is the debate on gravity, these gravity cultists just regurgitate their dogma. Once you do your own research you find out that things fall to the ground because there are invisible little goblins all over the place that pull things down onto the flat earth so they don't float away. Bloody modern scientists don't know nufink.
Completely irrelevant response. Gravity as a force is entirely different to claiming that a gas necessary for all life on earth is going to doom us all.
fun fact: storms today are no more damaging than storms in the 1930s
another fun fact: sea level rise is nowhere near the 20feet that Al Gore claimed in 2006 would have occurred by now, along with no polar ice caps (still around and Antarctica had highest ever recorded level of snowfall last winter) and thousands of dead polar bears littering the globe.
To be fair our science has become just as tainted/corrupted as everything else. The problem is how we use the knowledge, and humans are proving we're not very wise or intelligent - nuclear weapons, biochemical warfare, etc. Science is also telling us we shouldn't be producing/using plastics, processed foods, chemicals and toxins etc, that science created.
It has become a little like a cult based narrative - "science based evidence" is a trending narrative as if it's the truth.
After the debacle that was Covid it's easy to understand how it's all being doubted. Economics still thinks it's a science when it's probably the most cult based thinking.
Apparently science is only now catching up to what many ancient mystics were teaching thousands of years ago. But even this knowledge will be used inappropriately because we haven't nurtured right thinking.
I arrived in 2002 and was gobsmacked to discover I could buy a house without even applying for residency. Our govt is still naive about immigration but not as bad as it used to be. It is much harder to arrive, get residency, bring parents over to look after your kids in NZ schools while you return to a better career in Hong Kong or Taiwan or Singapore (or in the case of my neighbour once the kids were born and had citizenship the entire family returned to Turkey).
Unless house prices come down... noone can rebuild our economy and the Nats and co are as screwed as the rest of us.
Thus if we don't consciously let prices fall to the right level now... the next generation of skilled workers will leave.. our economy will fall and house prices will drop permanently.
We have to be able to attract skilled workers, develop productive export businesses and build a tax base to pay for infrastructure. And that all needs affordable housing (and reduced inflation).
Landlords need good tenants also to keep the values of their property... they won't find many if we just have zillions of unskilled peeps.
I can't see an alternative. I suspect the coalition has realized it also... lose money on houses in the short term in order to build a proper economy and build value in the long term.
If u think about it.. if nz infrastructure and public services get any worse. And more crime. how many of us are really gonna stay and prop the place up?
Noone shud need to choose. There are tons of houses. Just stop importing unskilled labour for a bit. At the rate kiwis are leaving we will have a great housing balance by the end of the year.
Natural population growth is negative and more kiwis leave than come.
So all shut be good.
Just focus on making businesses work.
Quite the opposite!
We need more investors to provide housing for people who need to rent in NZ.
Landlord/investors are providing a necessary service and many at the moment the way things are, are subsidising their tenants accommodation.
Full interest deductibility should never have been withdrawn by Robertson, he was totally wrong in doing this and has caused a far bigger problem by doing so.
I was expecting that to be someones response. We need lower house prices so that tenants can buy instead. Landlords buying up huge amounts of the housing is a big part of the problem.
The community service story is way exagerated and is designed to give investors ("mum & dads just saving for retirement") a free pass on tax because they are being so altruistic and helping society etc.
I disagree with you that Robertson was wrong. I know it changed many investors buying intentions which was the purpose.
In the 2010s, it was foreign buyers that were the Boogeyman. That got reasonably curtailed, didn't improve jot.
In the 2020s, it's landlords turn.
I think we have to accept that in an absolute best case scenario, at least 1/3 of people aren't buying houses. So in light of that, you need someone providing rental accomodation, and the gummint can't afford to.
You're comparing apples with oranges. Minimum wage is not the same as average wage.
According to this, average household income in 92/93 was $758.70 a week. 758.70x52x3 = 118357.2. The average house price in 1993 was just over $100,000. The ratio of average household income to average house price is around 2.5. (Note: I am using 1993 data as it was easier to find the stats).
According to this, average household income in 2023 was $126,411 a year. $126,411 x 3 = 379233, which is less than half the average house price of $923,713. The ratio of average household income to average house price is 7.3.
So short version: in comparison to incomes, houses are nearly three times as as expensive as they were 30 years ago. But of course 'household income' obscures something important - whether the income is composed of two full time wages, one full time wage, or a combination of full and part time. It's a fairly good bet though that household incomes in 2023 are more likely to include two full time workers than in 1993.
Average ordinary time hourly earnings were 14.86 an hour in 1993. That means it would take 6730 hours to earn enough to buy a house. or about 3.25 years. Average ordinary time hourly earnings were $40.96 in 2024 this means it would take 22552 hours to earn enough to buy a house, or about 10.85 years. Taking this measure, housing is more than 3x as expensive as it was 30 years ago.
Nowhere did I even suggest that landlords weren't necessary. I said we have too many of them. There are a lot of people who in a previous generation would have not problem buying a house but can't these days. These aren't people with unstable lifestyles like you suggest. Too much gaslighting going on telling people it's their fault they don't have a house.
I agree - true story - in 1971 I built a new house - well the group builder did - it is still there and cost me $14204 - yep brand new but I had to tame the section . I was earning I am fairly sure $4800 a year - which a year later I know went to $5699 a year. I can not remember being thankful it cost me less than 3 years gross pay. We used the child allowance for most of the deposit.. you could then. The house is till there of course in Roscommon Road Manurewa but would be sold even after this drop in prices recently for some absurdly high amount compared to what I paid... wtf?
I doubt reinstating interest deductibility will turn those into profitable businesses. Landlords aren't subsidizing tenants, they are in a business where returns are that crappy it makes no sense.
Any other business where you have to pour money in the front door every month to keep it afloat is trading insolvent. The numbers don't make sense unless you are gambling on cg's.
We need landlords that are not in it for the capital gain.. but running businesses that take fair profits from the ongoing rents and ideally that build houses to rent.
The problem is NZ has run a housing ponzi for too long with every man and his dog buying a houses as a retirement fund and renting it out... bidding to buy the house against owner occupiers and driving prices too high and then charging the wanna be owner occupier to rent the overpriced houses.
Prices dropping and forcing CG focused landlords to sell and hopefully put others off being CG driven landlords will help.
We want skilled next generation kids to buy reasonably priced houses to live in and raise families in nz and contribute to society and pay fair taxes so we have decent infrastructure and public services and grow exports et .
Vast progress in female education, choice in contraception, employment possibility, and cultural changes in traditional gender roles (e.g traditional wife at home, husband at work) have done that, and will continue to do so. I fully support all of these, and if there are less humans around then so be it, however it brings about the necessary changes in many countries economic and governmental support systems such as pensions, that stops them relying on human population increasing at an exponential rate in order to function.
Why didn't he say this before the election?
Because it would likely have been detrimental to winning the popularity contest. Many property owners may have chosen to vote for a different political party instead.
So it has become brutally clear to the government that we could potentially be facing the biggest property correction in modern history just as they have taken the helm and the question is.......how can we spin this to minimise damage?
After the last 6 years I have become so cynical towards politicians. Trust levels are at 0.
If change can't be stopped...embrace it. Needs to happen otherwise everyone who wants to actually work will be in Aussie paying tax there. To paraphrease if the few people at the bar paying for all the drinks leave, then the fight really starts for the rest when the freebies stop.
Look at what's unfolding in SA if you don't get it.
American municipalities for a hundred years have had the cure for idle land banking. They simply extend out all the infrastructure-roads, curbs, sewers, water, and then assess the adjacent land holder for the full cost on a cost per linear metre of road frontage. They soon sell the land to large developers who can wear those annual government development fees until they subdivide the land and produce the houses. Then each new title is assessed its portion and paid with interest those council infrastructure costs over the next 25 years. On average likely only a $2000 annual surcharge on top of much lower (than NZ) council rates.Bottom line: Municpal Bonds are the answer to funding council infrastructure. Locals fund the Bonds--not overseas interests. Why--because the locals pay no tax on the interest income from Municipal Bonds.
I wish he hasn't mentioned the ladder. Doesnt know what he is talking about. You dont climb the ladder when house prices are falling and you have a big mortgage to stay on top of. Any equity you put in will be erased by capital losses, meaning after 10 years even if you sell you will not have a deposit for the 'next' home.
So 2019-2023 buyers will be locked out from climbing the property ladder. But he wants to help people onto the ladder...
That's what one user said years ago here, and I thought about it and he was wrong. It's true if you own the property with no debt, but if you have a mortgage like most home owners do youve got to stay on top of it, and the mortgage doesn't fall in a falling market.
NZ median multiple = 6.9 (Apr 2024). It still needs to halve. (its mainly land prices that need to fall, not house prices)
https://www.interest.co.nz/Charts/Real%20estate/House-price-to-income
+1 for Chris Bishop going for it, but to get out of the housing crisis will require:
a) Net inbound immigration managed down to a sustainable rate (we cant catch up otherwise)
b) More than just zoning 30 years of land. The rezoning doesn't address the immediate housing shortfall crisis. We have to keep building fast now even if some is temporary.
c) The government actually building social housing on mass. There is a waiting list of about 25,000 and about 1,500 in emergency housing. We need, circa, 27,000 social houses yesterday.
I disagree.
1) Construction costs - aren't going to come down. Only if secondhand house prices (excl land cost) are higher than new build costs would the price of some houses (excl land) come down.
2) Council fees - not going to come down
3) Building supplies costs - they might fall a bit on some items where overseas alternatives are allowed.
4) Finance costs - interest rates have gone up driving asset prices down but given 1,2,3 its the land price component falling
5) Land prices (excessively tight zoning, unsustainable immigration, and stupidly low interest rates) blew these sky high & they have to fall. NZ has no land supply problem.
No not neccessarily.
As if you allow the raw pre development land to be bought at its next present use value, then it means the 'system' understands land use economics 101 and that understanding spreads to everything that is built on the land and makes the total system more efficient, ie reduces wasteful non valued costs and makes all inputs more affordable.
That's what they mean when they say, 'if the land is wrong, everything else is wrong.'
Good on him, now we're finally starting to see the millenials coming through to positions in government, this rhetoric will start to take hold more and more in coming years. Those who've personally experienced the pain of being priced out of their own neighbourhoods, or having to live with their ageing parents for years due to the extortionate rents, those who now catchup with their good friends only via Whatsapp and Messenger these days as they've mostly moved far away in all directions, in the desperate hope of having a home to call their own. No one cares about any one else's problems until it becomes their own.
Who was saying North Shore prices holding to 2019 levels?
Asking price below 2017 CV
https://www.trademe.co.nz/a/property/residential/sale/auckland/north-sh…
Even with the asking price clearly stated as $1.89M Homes still has estimate as $2.3M. Stange that the estate agent would get that changed, now let me think, why wouldn't they get it lowered?
https://homes.co.nz/address/auckland/devonport/2-9-calliope-road/XYRYJ
No.
It's called "an aged person(s) last home in an ideal location for maybe 10 years before having to enter supported care facilities".
Some people buy flash cars. Some boats. Some trophy houses. But when you're older, having a lovely place to live and watch the world go by is pretty darn good.
"Them's that don't understand their market will make limiting decisions."
Because the narrative is coming apart.
For a short while, it was boss vs worker. Then rentier vs renter. Both were on the back of GROWTH.
Growth is over. Has been, if we had been properly accounting, since perhaps 1970. But we chose to count flows, not stocks; chose to fly blind. Thus Starmer is more Tory than the Tories - who don't know who they are anymore, and are heading for oblivion. As have the old-school Republicans.
Different world emerging; all bets are off.
In real terms, there is still plenty of scope for land prices to reduce via removing speculative land banking.
And stripping out unnecessary costs as indicated in the non resource and building consents needed for 'granny flats.'
But it is also relative in that income increases can make housing more affordable due to the median income multiple comparison, although income increases could become redundant in the face of rising unemployment.
But all the coalition partners have policies that reduce costs without the need for subsidy.
Bishop is so far consistent to what they campaigned on.
It would seem that if you want to know what he is thinking just listening to what he is saying.
Then it will be a matter to see if his actions match his words.
This is the easier approach. The more difficult and smarter option would be for the government to work harder to *increase incomes* so housing becomes more affordable while preserving the wealth of existing houses owners. But this takes longer and is less fun, having to deal with "dull" things like productivity and health.
As low nterest rates over the covid period houses are worth only what the average person can borrow.
Higher interest rates devalue the land portion.
We have been Led to believe lower inflation and nterest rates are best.
With higher ijnflation/nterest rates, the house prices are lower with thr same mortgagei. But with wage growth the relative coat of the mortgage drops as repayments fixed.
In the last 20 years our housing has become more unaffordable under a low interest model
"Thanks central banks."
The RBNZ operates with the tools that it has.
1) Here is what the RBNZ governor said when the debt to income rules needed approval by the then government in February 2021:
But he has suggested that the Government's decision around giving the central bank debt-to-income (DTI) restriction powers is a political one, as it might adversely impact first home buyers.
"It comes down to a political decision around whether they [the Government] are willing, or not, to provide those tools and accept some of the challenges that may bring," Orr told media this morning.
https://www.nzherald.co.nz/nz/reserve-bank-boss-adrian-orr-warns-mps-of…
2) Remember this from Dec 2016?
https://www.interest.co.nz/property/85201/reserve-bank-confirms-meeting…
Some other reading material:
1) https://www.bis.org/publ/cgfs69.htm
2) https://www.bis.org/publ/cgfs69_nz.pdf
Page 5 - "In 2017, we held a public consultation on debt servicing restrictions for residential mortgage lending and recommended that these be added to our macroprudential toolkit. The Government decided not to add them at that time."
Remember it takes time for the lenders to update their systems to implement this. DTI needed to be established in in advance so that the lenders have sufficient time to update their systems and be ready to go. Once the systems are ready to go, it can be implemented quickly. The issue is that the lender systems are not set up - this takes time. The banks have been given 12 months to set up and update their systems to prepare for this.
To give you a sense of the timeline so far:
a) 7 Nov 2022 - the RBNZ sends out an exposure draft and consultation paper
b) 3 April 2023 - RBNZ releases new framework - https://www.reuters.com/article/newzealand-economy-idINL1N36603C/
c) March 2024 - lenders need to be ready to implement the framework (this is essentially 12 months for lenders to set up their systems)
d) July 2024 - debt to income applies
So it will take 18 - 20 months from issuance of consultation paper to full implementation.
The extreme house price risks were preventable back in 2016 when the then Finance Minister did not give the RBNZ the tools they requested to address macroprudential risks. There was lobbying by those with their vested financial self interests to not implement the debt to income measures. It may also have become a political issue with the upcoming elections at the time and may have cost potential votes for the incumbent government at the time - this policy would have adversely impacted property investors, and most owner occupier buyers - a potentially large voting constituency.
If you assume it would have taken 30 months, then the DTI framework may have been ready to go sometime in 2019. This would have been before interest rates reached their record low levels in mid 2021.
If a debt to income ratio of 5 was imposed back in 2019, then a significant amount of lending would not have been made (and house prices would have been less likely to have reached their record levels).
As a result of that single decision, this will result in potentially thousands of highly leveraged owner occupiers who purchased in 2020 - 2022 being collateral damage. This will cause cashflow stress, mental stress and unfortunately, some will resort to self harm.
This will likely also lead to an increase in demand for social housing.
If he is serious, then good luck to him. If it means that my children inherit a smaller amount, but their children can choose to stay in NZ and buy a house, then I really really wish him well.
However, given the shortsightedness of so many of my generation, I think the threat of losing votes in large numbers, will 'persuade' many of his colleagues to make sure it doesn't happen.
It's about bloody time. I know it's just words and the government doesn't actually want to hurt any of their voter bloc, but I just want to see someone start to tear down the deep ingrained belief that property investment is the path to security and wealth for all kiwis.
So his coded message is. We're of the view that we, the economy is flat-lining and near Stagflation so we want all you home owners shitting bricks about affordability in the medium to long term to bail out now to create market volatility and throughput into the market to help us avoid another negative quarter by this Thursday!🤭
Chris Bishop could easily and quickly address housing prices by allowing landowners whose land is not arable, nor of conservation value to build off grid housing immediately as of right. With solar power, rainwater, Starlink and modern septic systems, we don't need councils or developers to micromanage and constrain housing supply any longer.
Do some people really believe that investors are going to keep on paying out more to own a rental property than what they receive if there is no capital gain?
The reality is that investors are not the ones who have been the reason for price increases in property.
It is the owner occupiers who are paying more, Investors want to pay less.
We buy very well, improve and that is where the $ are, not from rental income.
Personally have been purchasing still as there are always opportunities in every market, and Chch is a stable market.
You live in la la land. How do you accurately value a property when the market is falling and will continue to fall in the foreseeable future. Every property bought by an investor whether for rent or for flipping is one less house for first home buyers who are not as stupid as you think. They are getting smarter and are not willing to just pay any price like they had to in 2021 when the housing market in NZ was nuts. I know you are going to come back and say Christchurch is holding up well etc etc. There is a good reason for that. The weather, less jobs and its in the South Island , miles from anywhere. Auckland is the place to be if you want to get ahead. Better weather, more jobs and access to the world.
Ex Agent, people who have settled in Auckland are now actually bailing Auckland snd heading South, for a far better lifestyle.
Christchurch values havent actually been dropping if you were to check!
There are not as many homes bring as sold compared to the peak, it is not that they do not want to buy, more the debt servicing at 9%!
Still great buying opportunities are around if you are looking!
Buy well and you co well in ChCh.
No I personally would not be in Auckland as we all know that it is very over rated!
I know the ChCh market, so if Aucklander investors are competing with owner occupiers then their returns will be very poor.
I did state a few years ago that I believed Auckland prices did not represent any value, and they have been massively inflated by immigrants, just like what is happening in Australia.
Australian mayor cities are far more expensive than most of NZ, and if people think bolting over there is the answer, then they will be very disappointed.
Have a look at RBNZ C31, data starts at 2014 onwards. Investors regularly outnumbered first home buyers 3:1 in the number of mortgages being taken out. And the average amounts borrowed were often slightly higher.
E.g. 2015 FHB average was $323k. Investor was $335k. This is despite LVR's being introduced in 2013.
"The reality is that investors are not the ones who have been the reason for price increases in property."
On a nationwide basis, perhaps very very recently where investors have stepped away due to negative cashflow arising from rising mortgage rates.
Here's the nationwide long term trend of residential property ownership:
https://www.stats.govt.nz/news/homeownership-rate-lowest-in-almost-70-y…
https://www.rnz.co.nz/news/national/432369/homeownership-rates-lowest-i…
It highlights how easily statistics are being misused to justify vested interests in the status quo.
“One thing that I’d also like to change the narrative around is just about how many people are purchasing their first homes. A lot of people don’t realise that in 2024, first home buyers are making up a bigger chunk of the market than they almost ever have.”
McKnight said about 25 percent of the market is first home buyers, up from the standard 18 to 20 percent, so now is a good time to buy.
I'm guessing the numbers were a lot different in the 70's and 80's, including the average age of FHB's. It's all fine and dandy pumping out statistics, but without knowing cause and effect, and purpose, can be pretty meaningless and useless.
https://www.nzherald.co.nz/business/property-academy-podcasts-ed-mcknig…
The article highlights the positive price feedback loop, and use of equity release / deposit recycling financing techniques.
But what a lot of people realise is that you can buy a house without having a lot of cash. So if I just walk you through my situation.
“I bought a house when I was 26, it went up in value, paid down some debt, and then I thought, ‘okay, well, I want to go and buy another house’. Well, I didn’t have the deposit.
“I didn’t save it up, but because my house had gone up in value, I borrow some money against that house as the deposit.
“And I take that money that I’ve borrowed from the bank, and I go put that down as the deposit on another investment property, and I borrow some money from the bank to purchase that, and I was able to buy my second investment property with no cash.
“I often say to first time investors, you’re effectively using your house or houses to go and buy more houses, and then as those increase in value, or you pay off some of the debt, that’s where you start to earn more of a return.
"Do some people really believe that investors are going to keep on paying out more to own a rental property than what they receive if there is no capital gain?"
There are non owner occupier owners who are in negative cashflow who believe that there will be a capital gain in the end. Their expectations of future capital gain are based on extrapolations of historical house price growth being repeated by the property promoters.
Here are comments seen on a property investor forum:
1) "At the moment it really hurts topping up."
2) "Topping up is a part of being new to investing for goodness sake. Why do these people think they can get paid each week plus a house at the end for bloody free? Next time know what your doing instead of expecting to have your cake and eat it too."
25% below current would be huge and ai don't see it occuring. I think there's enough pent up demand from millennials forced to rent with 10 years+ worth of saving deposits that they'll jump in.
Probably around 20% further down though would be quite fair in regards to a current rental price vs home payments at current interest rates (in my neighbourhood). But likely interest rates will fall over the next few years, and that will prevent anything significantly larger. Maybe 10% further fall left then? Only really significant fall would be if equity markets also tanked at the same time and everyone's deposits also were wiped out. Even then the impending lower interest rates would likely keep things near the rental demand prices.
"Look. What Chris Bishop actually meant was that we, National - the Party of business, want to see the nominal price of property across New Zealand keep rising, but to fall relative to wages, and that will occur as the Productivity Growth we are bringing in will make that will happen. Chris Bishop has been widely misunderstood."
(Anticipated response from Prime Minister, Chris(topher) Luxon upon his return, flying Premium Economy courtesy of his former employer, and after having a quiet chat with Mr Bishop in the PM suite at the beehive)
They were hugely profitable when interest rates were near zero, too. Lowering interest rates doesn't solve the problem you are claiming. Either problem in fact - houses didn't get more affordable when rates fell, just more expensive to compensate. Maybe the new DTI regulations would stop that from happening.
https://www.oneroof.co.nz/news/million-dollar-agents-urge-rethink-of-fo…
How will Bishop reconcile his wishes with those of his masters? Or is the top end totally decoupled from the average?
This is from the article
“I’ve spoken to three agents in that luxury space in Auckland and they all told me there’s next to no inquiry. It’s pretty dead out there.”
Paterson said that buyer shortage had led to some of his vendors discounting prices, one by $1m. He said a property on Lennon Access Road, Stillwater, had dropped its price from $5.5m to $4.5m in the six months it had been on the market.
So he can't find buyers for his target segment and wants to lobby the business friendly, right leaning led government to change government policy that will suit his vested financial self interests at the expense of the broader nationwide interest for housing? Did they make a contribution to the political campaign of any political party in the last election? And now looking for some favourable treatment?
Where a business person is unable manage their business adequately or has mismanaged their business, then under a capitalist system, they should be restructured. That is how the capitalist system works.
Like these examples:
1) Client First Realty - Auckland real estate agency fails owing $700,000+, blames downturn - NZ Herald
2) Harcourts franchisees - Companies behind Harcourts agency fold, new company formed to continue - NZ Herald
These businesses have experienced the boom times and benefitted financially. Now when the going gets tough (and they may have mismanaged their business and not had sufficient cash reserves as they have spent the financial benefits on an expensive lifestyle during the boom times), they ask for the rules to be changed for their owned vested financial selfish interest at the expense of the interest of those owner occupier buyers unable to afford to buy and the continued spending by the government on social housing, accommodation supplements which means money that is unable to be spent on education, health, infrastructure, police, etc?
They are clearly speaking their own vested financial self interests. There are very few local residents and other eligible buyers in their segment of the market - even fewer in a recession.
Here is the potential unintended consequences of that policy.
If foreign buyers are allowed even at the high priced segment, then the local sellers may be receive large amounts upon sale. Then they use these proceeds to buy up at lower price points (with leverage) & continue to outbid local resident owner occupier buyers and this trickles down to the first home buyer market.
If foreign buyers were allowed, then perhaps follow Singapore's stamp duty policy on foreign buyers with a stamp duty of 60%.
Singapore's tax policy is structured to give the highest priority to local citizens and resident owner occupier buyers.
Should NZ resident owner occupier buyers be given priority over foreign non resident buyers?
The huge vested financial self interest needs to be highlighted and the potential unintended consequences of a change in policy that will benefit a few, at the expense of the many.
Many people will frame a vested self interest as a national interest. We should highlight any such behaviour for the genuine betterment of the country's residents.
Going to get interesting for non owner occupier owners in the long term rental market where their tenant receives the accommodation supplement. Could this cause increased cashflow stress for those highly leveraged non owner occupier owners?
"The Accommodation Supplement had one of the biggest price tags of any of them, having doubled to about 380,000 people - about 20,000 of whom had a mortgage - it now cost about $2.3b a year"
https://www.rnz.co.nz/news/political/519879/housing-minister-highlights…
Note: 380,000 people are on the Accommodation Supplement - that is 7.2% of the entire population of NZ.
I don't for one second believe anything that comes up out of his mouth. His words say one thing, his actions say another - so to me, he lacks credibility. This is the same person who asked whether there was any modelling that would indicate interest deductibility would bring down prices, his response: "well, it's self-evident" isn't it. He knows who his masters are.
In my opinion I agree that our homes are far too expensive considering all of the factors that go into building them.
Also owning Multiple Homes is Unethical in a Time of Housing Scarcity
In today's world, where housing affordability is a major issue and many struggle to find adequate shelter, the practice of individuals owning multiple residential properties is unethical and detrimental to society.
While those with the means may view owning vacation homes or investment properties as a personal right, this behavior reduces the overall housing supply and drives up prices, making it even harder for average families to purchase their first home.
Every additional home owned by an investor is one less home available for a family in need. This exacerbates housing inequality and denies many the basic human right of adequate shelter.
Furthermore, the disproportionate amount of wealth tied up in luxury real estate does little to grow the overall GDP or economic prosperity of the country.
The capital and resources would be better invested in productive economic activities or public infrastructure that benefits the wider community. Instead, this wealth is simply concentrated in the hands of a few, doing nothing to raise the standard of living for the majority.
The remaining housing stock that is available is also often substandard, as a lack of competition in the building materials and home improvement sectors leads to lower quality construction and fewer DIY options for homeowners.
Builders and suppliers can charge high prices without incentive to innovate or provide affordable, energy-efficient homes.
Additionally, the energy and resources required to construct and maintain multiple homes has a significant environmental impact that we can no longer afford.
In an age of climate change, using valuable land, materials, and energy on luxury second homes is a selfish and short-sighted practice.
If we want to create more equitable, sustainable communities, we must reconsider the social norms around second home ownership.
Those with the means should look to invest in affordable housing solutions or public infrastructure rather than accumulating personal real estate empires.
Only by prioritizing the needs of the many over the wants of the few can we begin to address the housing crisis. The time has come to make home ownership a human right, not a privilege for the wealthy few.
Don't disagree, but has always been so.
Even in the country's were the people rose up to overthrow the land owing classes. They have all drifted back to the same model of a few political and wealthy controlling the housing of the many. Look at China, France, Russia
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