An article from Bloomberg yesterday has the following warning – with NZ at the top of the list in the accompanying graphic:
A world economy already contending with raging inflation, stock-market turmoil and a grueling war is facing yet another threat: the unraveling of a massive housing boom.
As central banks around the globe rapidly increase interest rates, soaring borrowing costs mean people who were already stretching to buy property are finally reaching their limits. The effects are being seen in countries such as Canada, the US and New Zealand, where once-hot residential real estate markets have suddenly turned cold.
It’s a sharp reversal from years of surging prices fueled by rock-bottom mortgage rates and government stimulus, along with a pandemic that popularized remote work and sent homebuyers on the hunt for bigger spaces. An analysis by Bloomberg Economics shows that 19 OECD countries have combined price-to-rent and home price-to-income ratios that are higher today than they were ahead of the 2008 financial crisis — an indication that prices have moved out of line with fundamentals.
Taming frothy home prices are a key part of many policy makers’ goals as they seek to quell the fastest inflation in decades. But as markets shudder from the prospects of a global recession, a slowdown in housing could create a ripple effect that would deepen an economic slump.
Falling home prices would erode household wealth, dent consumer confidence and potentially curb future development. Animal spirits are typically tamed when people are faced with higher repayment costs on an asset that’s losing value. And property construction and sales are huge multipliers of economic activity around the world.
Blackstone are hovering, soon they will buy everything at a fire sale price.
They say that they will be fair landlords, so we shouldn’t worry
the ‘hidden hand of the market’ at work in a way capitalists don’t like….cry me a river.
Oh, they don’t dislike this. It’s a great opportunity for New Zealanders in name only like Peter Thiel to start heavily investing in our property market.
yup great for corporations, not so great for the little capitalists who thought they were club members..leasing a top hat doesn’t make you an aristocrat it just makes you a clown in a topper…once again big capital fucks small capitalists..
The real capitalists warned us that this would happen when we pumped out billions for the pandemic. You give far too little credit to the government
freda so handouts to capitalists (corporate socialism) and middle class income subsidies(so they didn’t actually experience what beneficiaries live on) was the root?
maybe the capitalist dole bludgers should give it all back?
Perhaps the government shouldn’t have supported business at all, free market thinking etc.
‘free market’ only applies to the poor and let’s get real honest in areas of inelastic demand inflation is caused by price increases not wage increases…so we can drop that little lie.
Maybe Labour can build some bridges quicker than they can build houses for 27,000 people living motels to live under instead?
Or they can move into Jacindas where and share a room with little eve and Clarke too!
Hello stagflation my friend.
For the past 25 years (at least) New Zealand has been an economy dependent on housing and house price increases.
Not dairying, Lord of the Rings films, Rugby World Cup, etc. Housing. Homes that are not productive or create a lot of employment once they are built.
Every PM and Finance Minister has wanted it that way because increasing house prices makes home-owners feel everything it going right for them.
Now the bubble thinking of ever-increasing house prices has vanished.
hear hear ada
Is Adrian Orr actually an agent of Putin ?
I’m in the UK at the moment, staying with a relative who is a realestate agent. It’s worth noting that here I can buy a brand new 4 bedroom brick and tile house with double glazing and underfloor heating for less than HALF of the price of a very basic wooden house in Auckland. This in a country with over ten times the population density of NZ.
So let the correction begin!
and the build quality andrew? NZ housing is ramshackle enough but new builds in the UK especially rent to buy and leasehold are not getting a good rep.
oh I forgot Andrew…’welcome to the brexit sir’ how are you enjoying it? had any fish and chips yet?
No one saw it…coming!-*sarc*
Eke Panuku don’t build social housing in Auckland but they facilitate landlords to access IRR (Income Related Rent) subsidies for their investment properties. Which is not what the IRR wasn’t intended for.
Also, eke Panuku has teamed up with Blackrock in the NZ Super fund to access that money pit.
I guess they’ll be borrowing from NZders super annuation savings to speculate in more public-private rental properties to clip the IRR ticket!?