Yes, every country that borrows money into existence enjoyed a housing boom on the back of that money…
The OECD is just pointing out that, unlike some of those other places, ours was maybe more dramatic, and hasn’t yet had a real bust. The OECD’s stark property warning says:
Dramatic house price growth is burdening Kiwi households with debt and putting the nation's financial stability at risk, the OECD warns.
A biennial New Zealand economic survey report released today urges policymakers to increase Auckland housing supply, invest in infrastructure and counter restrictive red tape that is adding up to $110,000 to the cost of new dwellings and lumping households with mounting debt.
No, none of that news is new.
But it adds pressure to politicians to get out of the damn way.
RELATED READING:
- “Auckland house prices have in the past experienced Biblical style behaviour (i.e. feasts followed by famines, but also famines followed by feasts). It is too early to warn about the end of the latest boom in Auckland house prices, but it is timely to warn that the boom won't last indefinitely. This Raving looks at the past behaviour of Auckland house prices and the behaviour of Auckland prices relative to prices in the rest of the country. It provides insights that should be relevant to investors and other Auckland property buyers and sellers. It confirms that Auckland house prices have on average increased more than prices in the rest of the country, although possibly by less than is commonly assumed. But it also reveals that Auckland house prices have significantly underperformed prices in the rest of the country over protracted periods and especially after a sustained feast of the sort the Auckland market is currently partway through.”
Auckland house prices: from feast to famine [pdf] – Rodney Dickens, RODNEY’S RAVING
1 comment:
All true of course - but less appreciated is the reason NZ hasn't yet had a real bust like the rest. I think the reason is that current house pricing largely reflects the true cost of bringing new product to the market in our over-regulated environment. There are some exceptions perhaps (eg: parts of Auckland, Queenstown), but for the most part NZ property hasn't been overvalued above real costs to any great degree. That's a sad indictment of the effect of red tape of course, but it makes a bust much less likely. If it is a bubble, it's a bubble brought on mostly by red tape, and the bubble can only burst if red tape is dramatically reduced.
How do I know this? Well it's because of my various experience's with property development in Christchurch, which I think are typical of what's happening in most of the country (at least outside of Auckland and Queenstwon). I can see that:
1. Despite efforts to be frugal and cut costs, I'm struggling to build a new apartment block at a cost that is competitive with the price of current stock, and
2. Despite the release of a lot of land for residential development in Chch post quake, and a looming glut of sections as a result (that is effectively an over-reaction to that release) - land prices have not plummeted. That's because section prices largely reflect the real cost of infrastructure development in the current regulatory environment.
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