The Reserve Bank is driving up interest rates and is the only one in the world to proclaim proudly that its goal is to induce a recession and drive up unemployment.
The Reserve Bank is also directly responsible for the surge in inflation that New Zealand has suffered. This is because they have become a sub-branch of the US Federal Reserve Bank and carried out an inflationary programme of money printing to prop up the banks and broader financial system. (Check this warning I made two years ago for proof Printing money to save the power and wealth of the 1% is just stupid)
Billions of dollars were given directly to banks in NZ which was then onlent to property speculators and property prices were driven up 30% in one year.
Banks now have so much money that they are keeping tens of billions of dollars on deposit at the Reserve Bank. The Reserve Bank must pay the banks the ever-higher official cash rate in interest on the deposits they hold. The Reserve Bank created the money, gave it to the banks, and now must pay interest on it to the banks. This is voodoo economics which will cost the Reserve Bank about $2 billion in interest this year. (See “Reserve Bank not keen to make banks help cover cost of money printing”)
There has been no apology to the people of New Zealand for the monetary madness.
The Reserve Bank policies will also ensure a crash in the property market in the coming few years. At the moment everyone is watching house prices which have only fallen modestly so far. Two more important numbers that signal the crash to come are probably the collapse in the number of sales with reported sales in October down by 35% since last year and the leap in listings by 75%. This combo foreshadows lots more pain to come.
People of New Zealand or people in New Zealand? Do the mass immigration Ponzi madness next 😉
Seconded
already happening. Someone has to come and live in the 1 million dollar plus empty houses when 50% of people working in NZ are on close to minimum wages and will never be able to afford the totally unsuitable houses that have been built by often cash labour in the construction industry.
Perfect timing for next year’s election.
Housing price drop a great vote winner for Labour.
In saying that, why is this even an issue?
Housing is just one form of investment, why does it get more exposure than say someone with 100s of thousands of dollars in shares when shares drop?
Is it because it is the right for everyone to own a home, not just the wealthy?
Anyone thinking house prices dropping will win the opposition votes is delusional.
Not sure you are right. What you say is logical but I think even now with declining house ownership numbers, the amount of people who own houses is greater than those who don’t?? Certainly, even though we all know the prices need to fall heaps, NZers with houses still feel most comfortable when their houses are worth more as it is the only asset most NZers have which can be liquidated ie: Most are sitting on money and shares.
So those people always vote for higher prices. Over the last 20 years +, home owners have strongly voted for the govt who allows prices to rise.
In the early 2000s – 2008?, there was a push on from various lefties to get Helen Clarke to ease up on all the stuff like tax relief for investors and mortgage deductability etc to slow the rising house prices, (prices doubled then too). At the time, the presence of investors in the market was estimated to add 37% to the cost of a house for ordinary NZ home buyers.
But the lady was not for turning because she perceived (quite correctly although IMO rather immorally) that to do so was electoral suicide. And it has remained that way ever since. If home ownership drops below 50% then all bets are off).
The increase in house prices made everyone who had one feel rich so they spent .Now prices drop they feel cheated so they are angry and they blame the government .zThose wanting to buy fear that the price will go down further so hold of buying so those clipping the ticket are all poorer as well so they blame the government.Those wanting or needing to sell cannot sell so they are angry as their live is on hold and blame the government. The GST on all these transactions drys up so the government is poorer.
I may be prejudice but I cannot see a plus in this property slide for this government
I doubt house prices going down are going to help Labour – more likely the opposite in particular higher interest rates for those in debt!
There’s always plenty of pain if you are not a ten percenter.
I’m not sure we have inflation just because we have price rises (to explain better than I can https://consciousnessofsheep.co.uk/2022/11/18/the-danger-of-circular-thinking/)
What is more concerning is collapse of demand due to energy disruption which flows from the sanctions on Russia and an existing world shortage of diesel . Oil prices will probably go through the roof short term triggering a deflationary depression. Fun times.
House prices need to crash by around 50% .
Investors are relying on the Natz to gain power and reboot the craven ponzi.
Your 50% drop @ Blazer is probably closer to the mark. On the house I bought 20 years ago even with that kind of drop I’m up some 60% on the purchase price. A fair gain for 20 years, taking into account maintenance? I bought it as a home not an investment, other than to cite the obvious that housing is the best investment one can make, so it makes no difference to me as long as you’re selling and buying into the same market. You’re right again. Just a ponzi scheme and most have their snout in the trough. Not the least local councils.
I actually think House prices need to fall closer to 80% from peak. But the issue is? How much can they fall? We still have a housing shortage so there is demand unless everyone legs it to Aussie which may be a possibility (I know several lates 20s and 30s who are). But i assume we would have to grow immigration which will mean the same demand.
Also, I note, estate agents are pricing houses locally on rebuild value! The house 4 doors down is up for sale, it has a granny flat so was of interest to us. So the local agent based the price on rebuild value (meaning it was a couple of hundred above what we could do) and explained that’s what everybody was doing in the area as no-one knows where the market is at so cost of construction is a determinant of price (except where people are desperate I guess).
Agreed.
Other than the desparate, and there are always those; Divorce, death, bank foreclosure, most won’t sell their house for less than rebuilding cost (Insurance companies do a good web based calculation for that), plus land and improvement, minus fair wear and tear.
Eventually that has to be the ‘support line for sale price’.
When house prices were rapidly rising and people were getting rich overnight some on this platform were calling for a capital gains tax .If they had won would those losing money be able to claim a tax rebate ?
I don’t think you understand how CG tax or tax in general works.
House sale volume down by 35% Please spare a thought for the newly unemployed real estate agents!
The median NZ wage is $56,000 The world wide recommended ratio of house price to income is 2.5 lets round it up to 3. The median house price in a NZ with fair affordable housing would be $168,000. The actual median house price is $825,000.
So wages need to inflate by a factor of 5 or 6 or as you suggest a housing crash but not of 50% in fact 80%. Neither of these scenarios can be allowed.
All the new houses actually made the house and land prices soar upwards – because they did not work out the problem is not the house prices as there are set costs to build a house, but low NZ wages and more and more people who are on cash, in the black market/crime and underemployed.
“Neither of these scenarios can be allowed.”
They’re possible and they can be allowed, but they won’t be.
Agree 100% the government engaged in voodoo economics with the Reserve Bank and the banking industry.
“The Reserve Bank created the money, gave it to the banks, and now must pay interest on it to the banks. This is voodoo economics which will cost the Reserve Bank about $2 billion in interest this year.”
During the insane boom in 2021 Jacinda stoked the FOMO by telling us that she wants house prices to rise slowly (even after they had gone up 40% in 9 months) as its what kiwis expect. She caused this mess.
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