NZ housing nearing a trillion in total ‘value.’ Does anyone have a pin?

 

So, I just thought you’d like to know that “the runaway property boom has driven the combined value of all homes to over $900 billion for the first time, according to Reserve Bank figures.”  That’s edging up ever closer to one-trillion dollars in paper value, more than four times the country’s measured GDP.

This figure is up from “the end of December, [when] Reserve banks figures indicated New Zealand homes were worth a combined $873 billion.” That’s a six-percent year-on-year price inflation.

And that’s on the back of an eight-percent increase year-on-year in mortgage lending – new money borrowed into existence under the authority of the Reserve Bank at an ever-increasing rate into an ever-more restricted housing market.

But yes, we have no inflation …

The rise has incensed affordable housing campaigner Hugh Pavletich, who called it "obscene and dangerous" that houses and apartments were worth about four times the country's gross domestic product (GDP).
    "It's just ridiculous," Pavletich said. "Obscene and dangerous is the only way to describe it."
    In 2014 Pavletich compared the ratios in different countries of housing stock value to GDP. He found New Zealand's was 3.2 times GDP, behind only Australia, but ahead of the United Kingdom, Canada and the United States.
    "The housing stock should not be worth more than 1.2 times GDP to 1.5 times, tops, but nowhere near this 3.6 getting close to four times GDP," Pavletich said.

There is something wrong with the system of organising debt into currency that has helped to blow up this bubble. Something very wrong, and far too little attention paid to it…

[This] entire fractional reserve system is …inherently unstable, ‘a mad system of kiting between the banks and their customers — and an enormous superstructure of debt is built thereon, keeping almost every [merchant] in danger of bankruptcy.’

Which explains so much of tomorrow’s headlines, don’t you think?

RELATED POSTS:

• “I’ve been interested at all this talk of rising house prices—houses, in our little economy, being one of the main reasons for which New Zealanders borrow money. Or to put it another way, one of the main reasons for which debt is created.
      “In our system—and in most of the western world—the way new money comes into the system is by means of this new debt; debt organised into currency. An elastic currency.
      “And in New Zealand in recent years, new debt has been coming into the system at an increasing rate in recent years—almost at the pace it was coming in during the 2003-2007 boom. Which is to say, the year-on-year growth in our elastic currency is taking off again…”
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• [2014] “New Zealand’s current economic activity is being “juiced up” due to a China Bubble Boom and the excessive costs of the Christchurch earthquake recovery. Bureaucratic incompetence has meant this painfully long recovery will be a $NZ40 billion exercise, when it should have been in the order of $NZ15 billion.
      “Sadly it would appear, The Broken Window Fallacy is not understood by economic commentators, in that the Christchurch earthquake recovery (with some flooding problems due to Council incompetence with poorly maintained drainage infrastructure … in the main) is not building new wealth but simply the replacement (eventually, if ever) of the damaged and destroyed capital stock.
      “The latest figures from the Reserve Bank of New Zealand indicate the New Zealand housing stock has a “value” of some $NZ716 billion … roughly 3.4 times its GDP. It should not exceed 1.5 times ($NZ315 billion … ideally 1.2 times ($NZ252 billion). This suggests there is something in the order of $NZ401 and $NZ461 billions of bubble value in New Zealand housing. It takes about 25% of mortgages incorporated within this bubble value to fuel it … some$NZ100 billion through $NZ115 billion of at risk bubble mortgage value.
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• “Forbes magazine columnist Jesse Colombo invites international investors enamoured with NZ’s ‘rockstar economy’ to think again – offering 12 Reasons Why New Zealand's Economic Bubble Will End In Disaster, pointing out among other things the conjunction of historically ultra-low (unsustainably low) interest rates and a mortgage bubble grown by 165% in a little over a decade, with the fact that nearly half of all NZers mortgages have floating interest rates, with mortgages themselves accounting for nearly 60% of banks’ loan portfolios.
      “So sit tight waiting for the pop when interest rates head back towards reality.”
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• “There aren’t just problems with the way the morons measure “growth”  (by which they generally just mean consumption). There were problems, as we’ve now discovered, with NZ’s three supposed pillars of permanent prosperity.
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      “In a pig’s arse, it is.”
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