A property crash is coming – the only issue is what we do



There is a real estate bubble in this country that will implode at some point in the near future. It is of no consequence whether the Greens or Labour “favour” a price decline or not. The decline will happen.

New Zealand has the highest prices in the world in relation to income. It cannot and will not continue forever.


The long-term average of prices in relation to income came unstuck over the last few decades across the globe as the banking system engaged in an orgy of speculative lending. The subsequent property price collapses have been as inevitable as night follows day.

TDB Recommends NewzEngine.com

This was a worldwide phenomenon prior to the 2008 worldwide crisis of overproduction and associated financial crises that produced a collapse in real estate prices in the US and much of Europe. Often the crash is associated with widespread loss of homes, personal bankruptcies and growth in homelessness.



Trying to prevent a broader economic collapse following the 2008 ccrash has led to a massive growth in what is called “quantative easing” that is effectively printing money on a grand scale by capitalist governments and making it available to their wealthy mates to protect them from the ongoing economic crises . Interest rates have been kept at historically low levels. As a consequence, we seem to be witness ing new speculative booms in some asset prices.

In New Zealand, mortgage lending continues are record levels and reached a new high of $227.7 billion in the March quarter this year. This is one of the highest levels in the world as a percentage of gross domestic product.


Banks are a law unto themselves. The state has allowed them the job of deciding how much credit exists. Market competition drives them to expand their lending to the limit. In the process, they are earning billions of dollars in profits each year for the shareholders.

They extract massive profits by extortion. Last year they took $1 billion in penalty payments from their customers in New Zealand. Customers are charged an average of $15 every time they overdraw their accounts, pay their credit card late or bounce a cheque when the cost to the bank is actually just a few cents. The transactions are all electronic. Most of those charges are being imposed on those with the lowest incomes. We are being fined by the banks for being poor.

Banks treat taxation like it a voluntary activity. Tax avoidance appears routine. Yet when they are caught and penalised they pay back less than they actually owe!

Internationally the banks and their executives are simply part of a criminal conspiracy that fixes interest rates, launders money and at all times ensure the top brass are remunerated massively.
Another almost inevitable consequence of a property price decline will be a squeeze on credit being made available and a risk that banks could collapse. New Zealand banks are much more exposed to housing risks than others around the world.

New Zealand banks are also struggling with risks associated with farming debt following the collapse of dairy and other commodity prices. That was another bubble waiting to burst that banks and farm businesses were in denial about.

For the long-term future of working people in this country, we need places to live. That is being put at risk by the reckless lending and associated property speculation. The economic, social and human cost of the inevitable correction in property prices should also be born by the bank shareholders.

We need laws for the crisis that is coming that protects working people from the inevitable results of the bankers’ greed.

We need laws that stop banks simply evicting people from their homes when they fall behind in payments. Unrealistic debts should be written off. The banks bear responsibility for encouraging and facilitating excessive borrowing and their shareholders should carry the price.

Banking should be run as a public service not a means of extortion.


  1. And to maintain that bubble just until the next election with Key/Nats full support, Ray White is now marketing directly to millions of Chinese buyers and Fletcher’s is on a huge recruitment drive in the UK to entice more immigrants to New Zealand, after China’s biggest state owned construction company landed on our shores expecting John key to find work for it’s people.

    Wake up New Zealand !!!

    • This is the scary thing. NZ is so small that the bubble could potentially be extended to absurd levels just by allowing more and more foreign money to come in.

      The potential for this to go a lot further is certainly there

      • Yes exactly, it’s to keep his fake economy from going bust, and that’s what John key is banking on to take him through to the next election before it all turns to custard. I tell you Aaron, I have never felt so scared and terrified for my country and it’s people until John key came to power.

        • The trouble is that there is so little in New Zealand for the fortunate few among us to plow their increasing amounts of spare cash into. The blue-chip share market is way over-egged and to the Kiwi mind, property is the only safe haven. Not so safe as they may soon learn.

          Forget investing in start-ups. Far too much like hard work. Like our Government facing the housing crisis, they will do anything apart from what actually works.

  2. Great job Mike, totally agree with you. Greed has had its time and we will be forced to play fair, one way or another. These banks and their criminal, ” above the law ” , idiots running the show are in for even more of a massive shock soon.

    When the housing bubble crashes, lets hope that more folks can afford to buy homes and that there will not be a ” vulture sweep up ” by the wealthiest elite to buy up the cheaper homes.

    • I disagree. If the US and Europe are anything to go by (and they are), the banks will be bailed out by a combination of the tax payer (i.e. you) and anyone who has savings (a bail-in) due to the “systemic risk” bank failure causes to the economy (e.g. EFTPOS stops working, businesses can’t make payroll etc). The banksters will actually be REWARDED for their bad behaviour via various bonuses in the event of an all out collapse.

  3. When the banking collapse occurs, we need to nationalise the banks, with compensation only in cases of proven need.
    You’re right, banking should be a public service with any profits returned to the people.

  4. When the banking collapse occurs, we need to nationalise the banks, with compensation only in cases of proven need.
    You’re right, banking should be a public service with any profits returned to the people.

    • We did own the Bank of New Zealand at one stage until Roger Douglas and his mates got their hands on it?

      • National Australia Bank bought Bank of New Zealand in 1992 under the Bolger National government that had come to power in 1990.

    • Before then we could possibly make it less of a hassle to ditch the bank. Most of them are foreign owned here.

      Return money to the customers. Co-op does, but you’re a member as well as a customer. The phoenix from the ashes of the old PSIS.

      There are still credit unions around and some are very good value. Plus they have the benefit of personally knowing their customers.

    • You don’t need to nationalise the banks. Just gear-up Kiwibank to give it the financial clout to compete as an ethical lender to the entire financial sector.

      If there are improvements to be made, New Zealand will switch banks without being required to do so.

      • Indeed, Nick.

        It would also help if National moved the government accounts from Australian-owned Westpac, to Kiwibank. It is bizarre that National is doing state banking with a foreign-owned bank, wiuth profits then remitted to Australian shareholders, which in turn worsens our Balance of Payments,

        For the year ended March 2015, the current account deficit was $8.6 billion (3.6 percent of GDP; it was 3.3 percent of GDP for the December 2014 year)…

        New Zealand’s external debt position fell to $138.9 billion (58.1 percent of GDP) at 31 March 2015, down from a revised $140.9 billion (59.3 percent of GDP) at 31 December 2014.

        ref: http://www.stats.govt.nz/browse_for_stats/economic_indicators/balance_of_payments/BalanceOfPayments_HOTPMar15qtr.aspx

        • It is bizarre that National is doing state banking with a foreign-owned bank, wiuth profits then remitted to Australian shareholders, which in turn worsens our Balance of Payments,

          It’s not bizarre when you consider that the government is there to protect the profits of the capitalists no matter where in the world they live.

          It’s downright treasonous when you consider that it damages the country and it’s ability to look after itself.

  5. 1. Get rid of the Nat’s.
    2. Introduce Stamp Duty, Capital Gains Tax on 2nd, 3rd ect …owned properties
    3. IRD enforce the 2 year House Buying & Selling CGT rule
    4. Hang a few MP’s
    5. Write up a NZ Constitution
    6. Then Hang a few more MP’s

      • New Zealand does have a constitution, but it’s just not written in one complete document. This needs to change, Denny is right, out constitution does needs to be written up.

    • “4. Hang a few MP’s”

      I suppose you mean hang them up by their feet and tickle the living daylights out of them, while they turn red and blue?

  6. Banks are a law unto themselves. The state has allowed them the job of deciding how much credit exists. Market competition drives them to expand their lending to the limit. In the process, they are earning billions of dollars in profits each year for the shareholders.

    Dishonourable Debt: Why Borrowers Are Not Legally Bound To Repay Bank Loans

    Rather than lending us legal money, bankers have misled and deceived us into renting a record of a promise to pay legal money.

    They have misled and deceived us into believing that their record of their promise to pay us money, is actually money (legal substance).

    They have also misled and deceived us into believing that theirrecord of their promise to pay us money, is actually our money (ownership title).

    And here’s the real kicker.

    Despite the fact that they claim to have loaned us all this money, thanks to the magical paradox at the heart of double-entry accounting, they also claim, simultaneously, precisely the opposite to be true — that we have actually loaned all that money to them.

    Our monetary system is broken and we really need to fix it before we can get the economy working to benefit mankind and the Earth rather than just the wealthy few. Doing so will make the present wealthy few very, very poor so expect some a lot of resistance.

    • Well written. The problem is the small number of people who understand, let alone care. But 100% from one who seems to end up aligned with minority opinions..

  7. nothing can stop a property collapse to many have used there homes as ATM machines i don’t see why debtors should be bailed out you borrow you pay it back its simple if cant you loose the house there is no walk away from debts because its not societies or savers risk its the debtors risk. this from zero hedge make interesting reading from Vancouver

  8. I would doubt whether any illegal monies have come into New Zealand we are the least corrupt country in the world according to International surveys and information.

  9. I would doubt whether any illegal monies have come into New Zealand we are the least corrupt country in the world according to International surveys and information.

  10. It must be the pages I read – yet I still have no idea of how many people are indulging in this orgy of punting on Tick. It seems crazy to hamper the future by filling the present with so much debt. Unless they think some other mug will be paying when the music stops.

    I simply don’t understand why the supposed ‘value’ of my home indicates that I’m ‘wealthy’. I’m not. I’m in hock and living from noodle pack to noodle pack. For as long as I have to say, “This is our house; ours and the bank’s” I’m a debtor. I’m fooling myself if I say otherwise.

    And what’s the attraction to my old home town of Auckland? What?! Humid. Crazy drivers. Sprawling suburbs. Mind-boggling bus ‘services’. Commuting school kids. Grid lock. Over-used beaches. Too many service businesses. The worst roading in the entire of the country. Insane port location. Meh! Oh, and supine local government filled with little wannabe jump-ups who have watched too many episodes of ‘The Apprentice’. (More than one.) Fawning and ingratiating. I couldn’t find polite terms.

    Our country government’s people are the same for cultural cringe. Given them an overseas tiki-tour and they think they’ve Made It onto the international scene. Muppets.

  11. New Zealand is a special case, it does in comparison internationally have higher interest rates than most other developed countries, given the love for borrowing and living on credit. Also does the New Zealand middle class cling to a lifestyle that they cannot really afford under the given economic realities the country faces. There is also a lack of trust in investing in shares and in business activity, so people choose real estate as an investment option for themselves, particularly for their later years in life.

    All this has led to what we have, combined with a government that has a leader who in 2007 lamented the un-affordability of housing under the then Labour led government, but which has neglected building more homes, especially for the poor in state or social housing.

    Laissez faire economic policies allow people to speculate and use loopholes and to make easy gains, such as capital gains from onselling residential homes.

    It is also due to this love for credit and for a short sighted mentality to invest primarily in housing, that makes overseas banks and local ones, which are anyway overseas owned, decide to charge higher interest here than elsewhere, New Zealand is just a too small, unstable and economically limited country to put too much faith in, from a banker’s point of view.

    Then there is our overvalued currency, which is traded rather much in comparison to other currencies, again for speculation and pursued gains.

    The GFC came and went, and some of the reasons given above are correct, there was too easy lending and there were too many people enticed into buying or building homes. Actually there was much construction going on in the US and some other places, also like Ireland and Spain.

    The collapse happened rather for the reason that newly invented, highly speculative and high risk financial instruments were created and traded. They were based on debt, and people were told that by trading with debt, they could get rich quick. That this was a flawed concept came too late to the realisation of many involved, hence the crash of banks and finance institutions.

    Suddenly a house of cards collapsed, and quantitative easing and bailouts prevented the worst, and we now have banks and central governments sit on mountains of debt, there is the real risk. We have insufficient real growth in the productive economy, to afford what we are spending.

    Exporting milk powder, logs, and education services, and having tourists come here to spend, that is not sufficient. We already have the bust in the dairy sector, others may follow. New Zealand’s economy is based on high risks and unstable sectors, that can go from boom to bust quickly.

    The banks are now better prepared for crisis and even a house price crash, they will manage, but if the economy slows then we have the real problem.

    I wonder what all the new migrants, besides of the returning Kiwis we have, what they are doing for economic activity. Are we actually producing high end quality products and services that enable us to be a first world country?

    In that I have great doubt, we do some smart things, but most that we produce is not really high tech and that smart, over 60 or 65 percent is still agriculture and horticulture that we do in exports. Tourism is not a high tech and smart economic activity, countries that depend on tourism are generally low income economies. Exporting education offered by often imported teachers and tutors has also limits, we teach others what we may know, or what the teachers have to offer, and those going back overseas use that in economies competing with us.

    So yes, the housing market will slow, and correct itself, but I do not see a major crash at all to happen, it will rather be a moderate correction. We have not had that many homes available for sale, and high demand, locally and from overseas, some migrants, some investors, many also speculators, and that has driven prices to the extreme. Internationally homes in New Zealand are still rather affordable, that is the problem there too, we have invited the global market for housing, while locals are stuck on mediocre incomes, and many are shut out of the market.

    It is not an oversupply that we have, the opposite, and even a boom in construction, it will only come slowly, given limits in labour, materials and land available, and it all needs to be paid for. That will stabilise prices, perhaps drop them a bit, but it will not necessarily crash them.

    Other solutions are needed, a cap on immigration, stopping speculation, shutting out overseas buyers and some new taxes or changes to the tax system are needed. We do first of all need the government to step in and launch a major home building program, for first home buyers and for the poor in the form of state homes.

    That is not happening, so in Auckland, with the newly recommended Unitary Plan, if Council accepts it fully, we will only have new, unaffordable homes that will be available for those who can afford them, that is top income earners and those who come back from overseas or are new migrants with some savings.

    We do need a change of government, but even Labour will not bring prices down, as they already admitted.

    The few thousands who bought expensive homes over recent years and who cannot afford them, they may go bust, but the banks will adjust and manage, They are limited in numbers who will be over-leveraged, and that means no big bubble bursting.

  12. Also bear in mind, that nearly half of all home-buying has been from investors, who are generally well resourced financially, and who will not easily go bust, they can also make deals with banks, if things turn sour.

    Only some first home buyers may go bust if a correction forces prices down, as they risked too much.

    We have a major wealth shift in Auckland and the whole of New Zealand, from the poor and middle class to the asset wealthy. They wealthy use their monopoly game money to enrich themselves further, by expanding their property portfolios.

    The poor and working poor, and increasingly even the middle class is forced into renting, they will have homes, but they will not be their owns. The high rents will enable the owners to buy even more properties. The new Unitary Plan in Auckland will also enable those owning land and homes to intensify, building more units per section, and thus get even richer.

    The poor will lose and have no chance of improvements as long as the middle class puts up with all this, or even participates in the rort. And as long as they vote National, the enabler of this game, we will have no future for those at the bottom, they are ending up being a commodity as renters that can be exploited and shifted out once they start complaining, reasons are always easily found by landlords.

    So as much as Metiria Turei and others may wish for a major correction downwards, it will not happen soon, perhaps in a few years, once the new built homes meet more than actual demand, and that may even never happen if immigration is allowed to continue at high levels.

    • investors tend to buy on debt things like interest only loans low deposit lows ,no deposit loans of a few years ago these people have no skin in the game they are the first to go bust the middle class speculators. then theres homes owners who stuck cars holidays and fancy living on the mortgage over leveraged john key voters any change in policy immigration jobless anything will wipe these people out.
      under the open bank resolution policy its the savers who are carrying the risk for these inconsiderate selfish greedy people and the wanker bankers who took fees and commission. personally i stopped putting money in the bank 2 years ago due to there exposure to real estate and paid off all the debt as fast as i could today not even a credit card or bank overdraft of any sort . but none of that matters if the economy is taken out we all will pay with job losses loss of purchasing power cuts in government services society pays for the greed of the few.

      • The Reserve Bank is watching this, and has already hinted at measures they will take:

        ““LVR restrictions to date have improved the resilience of bank balance sheets by reducing banks’ exposure to riskier mortgages. This policy initiative is intended to further improve the resilience of bank balance sheets, and it will assist in restraining credit and housing demand.

        “We expect banks to observe the spirit of the new restrictions in the lead-up to the new policy taking effect.”

        • I may add, if the Reserve Bank takes stronger, restrictive measures, that will mean the promises of building over 400,000 new homes in Auckland over the coming 25 to 30 years will be seriously delayed, or simply not be met.

          And today, the news on TV reported, Labour had a report that showed, we will not get any significant affordable housing. So a “crash” is unlikely, a moderate correction is very likely.

  13. “Unrealistic debts should be written off. The banks bear responsibility for encouraging and facilitating excessive borrowing”

    While I agree with your post up to this point, with this last bit I will strenuously disagree.

    This bubble is driven by greed. All bubbles are driven by greed and fuelled by debt.

    To write off the debts of the greedy is to reward greed, to reward risk taking, and to penalise savers and the prudent.

    We bailed out the banks last time. And their behaviour has scarcely changed. Bailing out the risk takers tells them that it’s okay to take risks, because the downside and consequences of their risk taking will be bourne not by them but by others. So it encourages such behaviour.

    We have a frenzy of speculative activity in NZ at this time in the property market. Those who have equity in property are borrowing against it to buy more property, increasing their debt. Some are borrowing to buy consumer rubbish like jet-skis and BMW’s. They are over leveraged to the maximum they can get. So far for many it is paying off with large capital gains, mostly tax free.

    I’ll be damned if I’d take it lying down watching those greedy risk takers get essentially bailed out.

    And I don’t think many NZers, particularly Millennials, would lie down and take that either.

  14. Banks have protected themselves from being prosecuted. The laws were changed to not hold most of them accountable meanwhile they continue to ask for hand – outs and bail – outs at the taxpayers expense.
    This must stop.
    Get rid of the bankster loving and greedy corporate loving Natz govt. soon.
    They are ruining our country and completely out of touch and out to lunch ;
    walking dead w/ no shame.

  15. If there is no economic crash, it will simply be ushered in by a social collapse, leading to the inevitable economic crash. SERIOUSLY. Wake up, indeed! Do an article on the proportion of overseas-born residents in each country and then cross-correlate this with home ownership statistics… SACRY as *&#$@% El Salvador of the South Pacific, here we come…

  16. This Government is reckless with our economy as they’re purely speculating without any care of their actions and about to cause mayhem and misery to many in the country soon, and we are preparing for a real riot in the country over this when it hits.

    Disgusting lot they are sack them all.

  17. There is no good reason to protect those who bought houses at grossly overpriced rates. If they thought, rightly or wrongly, that they wanted to contract that level of debt, despite dire warnings from so many sides, the fact that they may be underwater through their own greed or stupidity should not qualify them for any kind of bail out when values begin to plummet.

    In this instance greed, like virtue, might have to be its own reward.

  18. The left needs to stop blaming foreigners and start blaming capital.

    If we make it so that housing is not an economic investment, then foreign buyers won’t be a problem. If we blame foreign buyers, then the problem remains. Kiwi speculators and landlords also keep kiwis homeless and in poverty.

    Nobody should be making profits from housing. It doesn’t matter if someone is a kiwi or not. It doesn’t matter if they live on our street or in Asia. It doesn’t matter if it’s a ‘family home’ or not. Buying a second home should be illegal, and if you’re not living in your home then you should be taxed so heavily that they don’t make a dime.

  19. If interest rates rise I can see prices going a little soft, but what would that look like?

    A big reduction in sales volumes

    Maybe a 10% drop in prices?

    This is because potential sellers simply don’t sell when they can’t get the price they want. Any low prices will be the result of forced sales by people who are under pressure – not the vast majority of homeowners.

    In Auckland there is a real shortage of houses (thanks to the Auckland Council) and that will not disappear any time soon. This will bolster prices for many years to come.

    • “In Auckland there is a real shortage of houses (thanks to the Auckland Council) and that will not disappear any time soon.”

      Again you are wrong!

      We can thank Central Government in failing to provide for social housing by investing in state housing, which they have decided to rather sell off to developers, who only provide the same or even less “affordable” housing, and sell the rest on the market at market prices, to those who can afford it (returning Kiwis with savings, new migrants with savings, investors from overseas and NZ).

      We have neglected regions outside of Auckland, so many NZers moved to Auckland for jobs and opportunities, as there is neither where they come from. We have a laissez faire, liberal immigration policy, and take in more immigrants than any other developed, western nation I know of, on a per capita basis, simply because this helps the government to fake economic “growth”.

      The central government has dragged its feet on needed public transport and other infrastructure building in Auckland and elsewhere, and rather spends billions on motorways and highways “of national significance”.

      They also rather give tax breaks and cuts to the better off, or benefiting the better off, than invest in various services we need.

      How can you blame Council for all this? They may have to shape up also to some degree, but were driven in between a rock and a hard place by central government’s irresponsible policies.

    • are you for real prices go soft who are you kidding are you talking your own book???
      any drop will cause a panic because there is no skin in the game its all built on debt and hot money!

    • One of the most reliable hallmarks of a well inflated bubble is the almost unanimous consensus that prices cannot fall. That prices must continue forever to rise, that maybe prices can flat line for a bit or slightly correct for a bit, but prices cannot fall hard.

      There can be no crash.

      This time it’s different.

      Every. Single. Time.

      In the history of bubbles.

      I see your stance Andrew repeated a lot currently. Demand is too high. Supply is too low. There is only one possible direction for prices. Up.

      But we know objectively that this is not true. Prices can fall, and they can fall hard. Crashes happen. Bubbles pop. Circumstances change, supply and demand can change, greed can turn to fear.

      It’s happened in many parts of the USA, in some prices have not recovered. In other parts they have. It’s happened in Ireland. In Spain.

      NZ is not unique nor different. It can happen here.

      But IMO it won’t happen until this talk of bubbles and crashes is not mainstream, is very rarely heard, and when it’s heard is greeted with overt derision. Only when almost everybody insists prices must keep rising will the situation be ready for the bubble to pop.

      The thing about bubbles historically is I know of not one example where a Government or central bank was able to gently deflate one. Once fully inflated there seems to be only one solution. And it’s not pretty.

    • “In Auckland there is a real shortage of houses (thanks to the Auckland Council)”

      How is recklessly opening up the borders too Auckland, Auckland Councils fault, remember Andrew, the egg comes before the chicken.

      National and National alone, are too blame.

  20. Maybe you did not take into account of this…. welcome to the global free market..

    Ray White signs deal with Lianjia as it launches into China

    Ray White has expanded its agency services to China, signing an agreement to list new and old properties for sale with China’s largest real estate agency, Lianjia, also known as Homelink.

    Lianjia, which has more than 6000 branches in over 25 cities in China, will co-list Ray White’s New Zealand and Australian and properties in Mandarin on its websites.

    The exposure to Lianjia’s audience – about 260 million Chinese buyers – will provide Ray White with the leverage into China and, more importantly, fulfil the organisation’s strategy of becoming more diverse and a brand that is more attractive to the Chinese community. …

    • Indeed. So clearly there is going to be a social collapse/civil unrest/civil war, when the NZ born serfs crack and decide to brutally murder their foreign overlords en masse. You may not like it. But raging against this inevitability will not prevent it from happening.

    • Does this mean Ray White was given a guarantee by National that there will be no foreign sanctions, ever, to foreign ownership?
      Otherwise why would they do it?

  21. The “bubble” is not going to burst so long as we have an unlimited supply of millionaire refugees’ from the UK, USA and China to draw on.

    And both Labour and National are too scared to do what is necessary.

Comments are closed.