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So, You Want To Buy Your First Home?

Written By: - Date published: 7:00 am, March 7th, 2021 - 75 comments
Categories: babies, capital gains, cost of living, Economy, employment, families, housing, jobs, kiwisaver, Media, the praiseworthy and the pitiful - Tags: , , , ,

First state house in NZ, built 1937.

So, you want to buy your first home? Firstly, congratulations! You have joined or will join the large but slowly shrinking team of rational Kiwis who think ahead and look at the future. Indeed, why toil away your life paying dead money into somebody else’s mortgage?

It is said that our economy is a housing market with bits bolted on. Sadly, this has more than a ring of truth to it. Apparently, there are hundreds of billions of dollars slushing around in our housing market, all mostly (!) tax-free. No wonder all this capital will never find its way to other ways of investment, e.g. to lift productivity and our overall standard of living. This legal Ponzi scheme only works if and as long the money stays tied in the housing market. The media, banks, insurance companies, real estate agents, politicians, your friends, family, and work mates, your children and even clairvoyants will see to it that nobody sings out of tune and deviates from the path of rational orthodoxy – I cannot think of the name for it.

As first-home buyer you will have undoubtedly done your homework and sums and worked out that paying the mortgage is only slightly more than paying the rent and in some places it is even less. You have worked hard, both you and your partner/spouse, to save for the deposit, which always seemed so close yet so far with the ever-increasing house prices and ridiculous bidding wars at auctions. The ancient but wise Greeks knew of the punishment of Tantalus but he had been a bad boy and it is not fair that first-home buyers have to endure a similar treatment.

Currently, you will have to save up about $100,000 and on average for 238 weeks to open the door to have a peek inside let alone a foot in the door. But you did it! Well done. Quickly buy a house before it is out of reach again.

How many sacrifices did you make? How many coffees, avocados smashed onto toast, and romantic dinners did you forego – yes, date nights are important even when no longer dating – and how many take-away meals on the couch watching Netflix did you have because you were to buggered cooking a decent healthy meal or to socialise with friends?

You know it has to be done. You know how it is has to be done. There are plenty of really really good and helpful articles in the media with useful tips on how to save for a deposit and pay off your mortgage faster (usually by the same authors AKA opinion leaders but usually not in the same article). If you think it is too hard then there are the articles to put you to shame and give you an instant guilt complex. These are about snotty twenty-something average Kiwis who have bought their first home. If these Wunderkinds can do it, so can you, you wimp. If that does not do the trick, think of the theme song of Bob the Builder (I told you that your children would influence your decisions) and once it is in your head you are effectively brainwashed.

To give you a helping hand, Government allows you to dip into your retirement savings to buy your first home, knowing full well that your first home can make a huge difference to your financial comfort in later life. This is how the system has been designed (no, not actually KiwiSaver). More than 40,000 have taken this option last year, which just shows how keen people like you are to get on that first rung and how keen politicians are not to upset the apple cart. The competition from asset-rich existing homeowners and investors is more brutal than Mortal Kombat.

If you find saving (too) hard, you have to come up with a more cunning financial plan. This may involve buying Lotto tickets, betting at the TAB, or starting your own church to fill your pockets – black leather biker jacket, hair gel, and shades are optional to avoid too much glare from above. One word of advice (disclaimer: I am not a financial advisor): do not use/buy a car if you can reasonably avoid it – it will save you thousands and it is better for the Planet.

I can only assume that FOMO played only a major role in your decision to jump on the property ladder. This is entirely natural and understandable and thus quasi-rational. After all, you were already well and truly captivated by the rat race. The media have been fuelling FOMO, of course. At the same time, the media love publishing horror stories of psychopathic landlords and meth-smoking or meth-cooking sociopathic renters. The latter almost led to a whole new industry of meth testing. Of course, you do not smoke meth, only others do and drug testing is big here in NZ.

Despite the many romcoms on widescreen TV, the call of nature had to be put on hold for a few years, on average 238 weeks, to be more precise. No worries, IVF can make up for it later. This could be another story entitled So, you want to have your first IVF baby? However, the tortuous path leading to IVF is no fun and IVF is no picnic in the park. Besides being emotionally draining it can also be a drain on your bank account.

Once you have your dream home and children you may find that half an income, usually from the male AKA bread-earner as opposed to the bread-maker, can make it a lot harder to make ends meet. Mind you, you can always work more hours, go for promotion, and work yourself to your first burnout and possibly an early grave. Not to mention that financial strain can take its toll on the relationship, including those precious ones with your children. But it is worth it and don’t take just my word for it, follow the example of all the many others. Aotearoa-New Zealand needs more babies, lots more, so go forth and multiply, after you have bought your first home, of course – first things first, as Maslow said.

All that money that you did not spend and saved up was not doing much, i.e. it was not productive, was it? Did you have it in a savings account? Based on new residential mortgage lending statistics, well over $1 billion was sitting in banks as deposits in 2020 and at least $250 million was of first-home buyers. Imagine if some or all of that money had been spent in the economy, e.g. on coffees, or going to the movies, or on new clothes, or on dinners for two or with friends, or on a hobby or sport or on learning/creating something for the sake of it and just for the joy it sparks and the reward of achievement and accomplishment in its own right. It would have been a welcome boost for local retailers and hospitality. Instead, millions of dollars were safely stacked away under the matrass, so to speak, and taken out of the economy. And you were just working your ass off that would make a Calvinist feel inferior.

At the end of the day, it is your choice and decision about your life. It is pretty exciting (or nerve wrecking) to buy your first home together or by yourself. You know why you (want to) do it and whether the sacrifices are worth it. Once you are on the ladder, it gets a little easier, financially speaking, because you do not need to work so hard to scrape together another deposit. In fact, your first home will do this for you while you are asleep or lying awake in your bed at night. In fact, your home is likely to earn more than you do in your job and it does this 24/7, 365 days a year. Money does not grow on trees, it grows on houses. It is pure magic!

75 comments on “So, You Want To Buy Your First Home? ”

  1. mickysavage 1

    Good post. I feel afraid for young couples buying their own home right now. Interest rates are low but a couple of points increase will make things really tight unless you have lots of head room.

    The Government has a demand side policy announcement due soon. It will be interesting to see what they decide on.

  2. Ad 2

    Bank of Mum and Dad celebrations should be held 5 years after 21sts.

    • Sanctuary 3.1

      I don't think the venomous AMDS (Absolute Majority Derangement Syndrome) much of the more activist left has succumbed to in it's rhetoric since the election is helping anyone very much.

    • Incognito 3.2

      Thanks, I hadn’t read that piece by Anna Rawhiti-Connell and I love it because it is so bloody real (raw) and true (tragic).

      Reading it, I thought of the Kübler-Ross five stages of grief. First-home buyers cycle through the various stages but never quite reach the final stage of acceptance and closure. The many powerful external forces at work ensure that your internal voice and narrative inevitably gets sucked back into the rabbit hole. It is not too dissimilar for women/couples not being able to conceive and have children. Advances in medical technology keep shifting the posts and therefore the hopes. Yet, it can prolong the suffering and act like a festering wound that never quite heals. The only real solution is to truly let go, 100%. Life is full of truly magical moments but looking for or at the ‘magic money tree’ is looking for or at the wrong place or thing and you’re likely to miss other things. And no, these are not often experienced when glued to your 4K mobile phone screen.

    • McFlock 3.3

      that speaks to me, that's for sure.

      A few years ago, I was doing the math to buy a wee bungalow at mate's rates. Could almost makes ends meet on it, really close. But not close enough.

      Now, that bungalow got sold recently for over double what I was trying to scrape together.

      The security of owning my own place just isn't going to happen. It's a joke.

      • Pat 3.3.1

        "The security of owning my own place just isn't going to happen."

        It may still happen (and hopefully not too late)….this level of indebtedness in housing is unsupportable by NZ incomes (as everyone is relating) so prices will realign…it is just a question of when.

        • McFlock

          Probably just as I have to go into a retirement home lol.

          If folks wonder why gen-x can be cynical, they haven't been looking at the last 30-40 years.

          • Pat

            How long before you enter a retirement home?

            • McFlock

              Couple of decades.

              But this situation has been brewing for a similar amount of time, and it'll take more work to fix than it did to break.

              • Pat

                Think a couple of decades may be somewhat pessimistic..and yes it has been brewing for decades but interest rates havnt been at zero bound until recently and that message should be creating some hope

                • McFlock

                  Mate, it really is just down to lotto now, regardless of interest rates.

                  I'm better off than a lot of people, but I'll never be part of the minority who own the home they live in (and yes, they are the minority now, when counted by individuals rather than householders where one member of the household owns the dwelling).

                  Came damned close, though.

                  • Pat

                    When it all goes down in a screaming heap there is the probability the gov will have to step in (as in the past) to pick up the pieces and provide opportunity for the average joe to support a new market level….not doing so isnt really an option….its unlikely to do anything for investors however.

                    • McFlock

                      Thing is, that only screws investors, not homeowners.

                      If someone goes underwater and can still service the payments on their mortgage, they still have the home they paid for.

                      So as long as you do the math without viewing it as an investment, and are conservative with the expected parameters, you'll probably be ok.

                      But then if prices crunch 30-40%, I might be back in with a chance lol.

                  • Pat

                    Before the latest 20% increase house prices in NZ were estimated to be 40-50% overvalued….unsurprisingly that equates to an affordability ratio of 3-4 times household income.

                    Average disposable household income in NZ is currently 86,000 pa. (gross $107,000)

                    • McFlock

                      lol just saw a bank ad talking about how some person was going to stop buying throw pillows and start saving for a house(using the bank's handy app).

                      Throw pillows and avo smash aren't the problem, but then the powerful always like to pretend trivial personal choices are the difference between hardship and privilege.

                      And knock ~$10k off for the median. Just to really understand how "most" NZers really feel about the housing market and the woes of the landed class lol

        • Craig H

          Bernard Hickey thinks differently – the actual debt on housing is low (20% of value), the LVR restrictions have actually made a crash a lot less likely, and the low interest rates mean payments on the low debt are low.


  3. Stuart Munro 4

    The real tragedy is that governments, and Treasury for all the patronising bullshit they talk, like

    "It's the economy, Stupid."

    Would have seen it coming if they had the ghost of a clue about economics, and had they had a shred of social responsibility they'd have prevented it long before it got this bad.

    Brian Tamaki, it seems, knows more about God than our supposed economic experts know about economics.

    Never forget it.

  4. dv 5

    AND what's going to happen when the interest rates go to 5%, 10% Geez

  5. Peter 6

    In 20 years the population grew 30%. The housing deficit is like that tsunami wave, it goes on over quite some time before things even out. Unfortunately while the problem rolls on and efforts are made to mitigate it, other factors change, more earthquakes large and small come to compound the situation.

  6. Sanctuary 7

    The central political and structural conundrum is how do you deal with the housing crisis without also destroying the primary retirement income vehicle & central aspirational goal for and of the vast majority of the middle class? This is a generational problem in creation and can't be fixed by magic.

    Now one can excoriate the middle class (and I frequently do) but they exist and the fundamentals of politics is they control the media narrative in NZ, are well connected and above all the vote in very high numbers. So if you want to deal in politics as the art of the possible, you have unpick the Gordion knot of my first paragraph.

    There is no point looking back. To take my parents as an example, they didn't have a brass razoo to rub together but Dad was able find and work three jobs with generous overtime rates, they were able to cash in the child benefit for a deposit, got a fixed rate 3%, 30 year mortgage from the state advances corporation for a cookie cutter 1200 square foot three bedroom one bathroom home in a new suburb and never looked back. They got a home for their burgeoning family and the inflation of the 1970s reduced their mortgage to nothing and the fixed 3% interest meant they were protected from inflation. The long boom of the 1950s-60s means they went from scratchy working class to prosperous middle class in just a decade of hard work.

    Almost none of those conditions operate now. New suburbs are so distant and expensive to develop they’ve become problematic as a solution, to say the least. Welfare has retreated from it's role as social security to being a grudging subsistence for the deserving poor and less than that for the undeserving poor. The government is not in the mortgage game anymore and it doesn't build mass housing anymore either. Jobs are scarce and we are now a low wage economy. Inflation is regarded as an anathema by economic technocrats only slightly worse than mass pedophilia.

    Now, SOME of the conditions of my parents generation can be reproduced with sufficient will. But it bears remembering that if you were to pick any of those long gone conditions and explicitly seek to recreate them you'll run into a wall of implacable opposition from vested interests and the beneficiaries of the current system – the liberal left middle class won't be that liberal left for very long if they think their main assets are about to be depreciated and structural economic change is very hard in neoliberalism, it was designed that way and we've also got an electoral and constitutional system post mid 1990s designed to reward technocratic centrism, diversity and incremental consensual change. It is however also explicitly designed to act as a brake on radical and unilateral economic change.

    Personally, I perhaps fancifully see some indication of disaster socialism from this government, with COVID being allowed to drive structural changes they approve of in private but would never succeed in implementing as stated policy. The big one has to be the turning off of the immigration tap, an act impossible prior to COVID because of the weaponising of the accusation of racism by those who benefitted from it. No immigration will ease the housing shortage as we catch up; rising wages due to labour shortages will hopefully lead to an increase in productivity and higher incomes all round. But anyway, this is a thirty year problem in the making and it'll be a thirty year one in the fixing.

    • RedLogix 7.1

      Excellent – yes

      The system we have is pumping money into the economy via housing price inflation and while it's having very uneven outcomes, we should at least be grateful that it is keeping the economy going along for most.

      A pause to rebalance as you describe in your last para is a very reasonable ask.

    • Sacha 7.2

      Jobs are scarce and we are now a low wage economy

      The very definition of a broken market right there.

      • Phil 7.2.1

        we are now a low wage economy

        By any reasonable metric of income (Purchasing power parity, GDP per capita, median incomes, etc) New Zealand household incomes are in the same ballpark as countries like Italy, Spain, South Korea, Japan, and just a tad behind the likes of France and the UK.

  7. Rosemary McDonald 8

    ….they were able to cash in the child benefit for a deposit, got a fixed rate 3%, 30 year mortgage from the state advances corporation for a cookie cutter 1200 square foot three bedroom one bathroom home in a new suburb and never looked back.

    The facility to capitalise on the Family Benefit, and the low interests rates on Housing Corp loans did more to get the working classes into the security of home ownership than possibly any other schemes. Maori, Pasifika, Pakeha….all entitled to this leg up.

    All gone, by the time I put down the 25% on 'the worst house in the street' in the late eighties. And those stratospheric interest rates really hurt. Both had to have jobs to secure a mortgage if you failed to qualify for the modified Housing Corp loan. Juggle, juggle, ships that pass in the night parenting.

    BUT…we just escaped the iniquitous Student Loans….and may the fleas from a thousand camels infest the groins and armpits of the politicians of all hues (and their descendants unto the nth generation) who allowed, then entrenched this final nail in the coffin of what could have been an egalitarian society.

    No hope that I can see of any political party campaigning on turn-the-clock-back policies that would fix this shit.

  8. RedLogix 9

    Good post.

    Money does not grow on trees, it grows on houses. It is pure magic!

    It does seem a bit weird, but it helps to think of it as a somewhat dysfunctional, disorganised UBI. Not a very universal UBI and easily gamed, but that's what it is essentially, a method of pumping liquidity into the hands of people, because our business sector either cannot or has failed to do so.

    • Muttonbird 9.1

      Not a very universal UBI.


      A confused and quite frankly obscene comment from you. Well done!

  9. Incognito 10

    Exhibit #1 from today’s Stuff homepage AKA landing page:

    OPINION: Kate Shuttleworth thought she'd never clear her student debt, but now she's on the property ladder.


    Well done Kate, and I hope you enjoy life in Melbourne.

  10. Incognito 11

    Exhibit #2 from today’s Stuff homepage AKA landing page:


    Variations on a theme and no surprises at all but congratulations on your first home, guys.

  11. Incognito 12

    Exhibit #3 from today’s Stuff homepage AKA landing page:


    Yup, heard it all before, but good read anyway, thanks Shamubeel and Rosie for your valuable insights as economists.

    The last paragraph is worth quoting though:

    Realistically, for the average young person today, no amount of regular and disciplined saving will give them the same access to homeownership and housing costs. For that, young people need to get politically active. The political narrative is still focussed on and for baby boomers. Until the younger generation’s issues become the dominant political issues, nothing will change.

  12. Incognito 13

    Bonus Exhibit #A from Stuff:


    By the incessant Bernard Hickey.

    I can’t resist citing from it:

    But the spreadsheets don’t lie, and even the Reserve Bank and Treasury acknowledge that nothing really changes with supply restrictions and the inability to tax housing wealth. In the last three months they have both forecast further house price inflation of another 20-25 percent over the next three to five years.

    That’s despite it being ‘obvious’ to politicians and auction room viewers that it’s impossible for house prices to rise any higher. They, too, are beginning to believe in the impossible when interest rates stay lower for ever, and voters refuse to allow their politicians to seriously address the huge tax and ‘too big to fail’ advantages of the housing market.

    Just as well we have Covid to distract Government and put the hard but necessary stuff on the backburner.

    • Pat 13.1

      Poor old Bernard making the same mistakes again….yes all those asset rich investors and even cash rich buyers can ramp the prices up but ultimately those prices are supported by what the renters can pay (unless you wish to leave them empty and pray the ponzi continues ) and we simply dont earn enough to pay the rents even with the billion plus gov subsidy every year and interest rates are pretty much as low as they can go …the banks have pretty much a 2% margin (their profit) and even if the OCR goes negative they will claw back with charges….and every dollar going to service unreal mortgages is a dollar not supporting local business'

      So Bernard and Treasury can calculate the theoretical maximum but out in the real world that maximum has already been surpassed.

      • Sacha 13.1.1

        every dollar going to service unreal mortgages is a dollar not supporting local business[es]

        Which hurts us all.

        • Pat

          it does…and ultimately it hurts the banks too, as the defaults increase from business loans and mortgage holders.

      • Craig H 13.1.2

        With current interest rates, a yield of 3% can be cashflow-positive on interest-only even before capital gains. With current low inflation, there is no reason to increase interest rates. All the preconditions for the market to continue to boom are there.

        Now, 3% yield might be a bit high in Auckland or Wellington in that 3% on a million dollar house is close to $600/week (so normal then), but there are still cities where 4-5% yield is possible while still having vaguely affordable rents. Buy a 3BR house for $400K in Christchurch (they still exist here) and rent it out for $450/week – easy.

        • Pat

          yep there are stll some 400K houses in Christchurch….as is /where is (that is unrepaired EQ damage)

          Your yield numbers are gross….and your insurance, maintenance and rates costs are increasing…you assume 100% occupancy….and you dont factor in loss of opportunity of the deposit.

          The only thing making it attractive for recent purchasers is the expected capital growth…take that away and its a loser.

          • Craig H

            As someone who lives in Christchurch, there are assuredly parts of the city with $400K 3BR houses on their own sections that are not as is/where is or still EQ-damaged. They aren't particularly popular areas with anyone other than investors or first home buyers, but they still exist.

            • Pat

              As someone whos looked at a number of those properties recently theres a couple of things I'll add…the listing price may be (slightly) lower than 400K but the sale price is over…and those that are that undesirable will be the first to crash and the hardest to move when the time comes.

  13. Incognito 14

    Bonus Exhibit #B from Stuff:


    Don’t listen to an anonymous blogger with no name. Instead, listen to people with name recognition because they know more and better than the average Kiwi, that goes without saying, especially when they have ‘made it’ and are successful in their respective fields.

    The solution for the housing crisis is obvious: mandatory stay in MIQ (Mind Indoctrination re-Qualification) with forced hypnotherapy that induces a severe and terribly itchy skin rash whenever you do think about buying or selling a residential property. In addition, total abstinence of electronic devices to block access to media sites, social media, and news in general. Four weeks should do it with a booster session of another week 21 days later. It is the exact opposite of the mass mind manipulation through media that we are currently enjoying.

  14. Incognito 15

    When an academic degree and education is no longer a ticket to ticking the boxes of life.

    When I graduated in 2011, finding a job was hard, and wages were low.

    A decade later, just as our earning potential meets respectable levels, Covid-19 hits and another recession looms.

    Not only have people lost work, but companies are now looking to hire “cheap desperate kids who will put up with anything”.

    All of this is happening against a backdrop of unbridled growth in house prices.

    My partner and I aren’t the only ones now asking whether we will ever pay off our student loan debt, if we’ll ever be able to own our own home, and if we can afford to have children.

    This experience is typical of our friends and colleagues.

    Life is put on hold, it seems, which is so sad when you think about it.

    And in 2020, New Zealand’s fertility rate sunk to an all-time low.

    There are a range of reasons for dropping fertility, but as professor Paul Spoonley writes in The Spinoff: “Having children is replaced by surviving economically.”


  15. Castro 16

    No Zealand Wars II; a divided not-really-country should 'fix' it. Either way, that's what "we" are on track for. Pity "our" leaders can't muster anything better than a Brazil/South Africa of the South Pacific; for shame.

  16. georgecom 17

    This post and a plethora of reports in the media over recent months reinforces one simple point for me, this country should have a capital gains tax. This isn't because of the rampant house prices and the need to cool the market or even to drop house prices, although that is an important secondary issue. It's more fundamental than that, a dollar earned is a dollar earned and should be subject to tax. The devil might be in the detail of how the tax is levied however. The exact rate of tax another matter, Labour has talked of 15% in the past. The money generated is useful but is, again, a secondary matter to the basic principal of needing to tax income. ie The fundamental issue is taxing capital gains, the impact of the housing market might be a useful consequence and the extra revenue useful, but not the reason to implement the tax.

    If a CGT yields and extra $1-2 bullion per year what to do with it?

    increase the bottom tax threshold by a few % points, several hundred million per year

    increase base benefits (excluding hardship benefits, accommodation supplements etc) by 10%, several hunred million per year (I roughly estimated core benefits at round $5.5 billion)

    use the extra revenue to cover post covid govt budget deficits

    all worthy uses of the revenue

  17. DukeEll 18

    Plenty of employment and cheap housing in the boonies. This fixation on the outer ring outside sh16 and inside the Bombay’s / upper west as first home buying territory is ridiculous. Allow mass intensification alongside major rail corridors and proper regional development in places like dargaville, Te puke, paeroa, Huntley, taranaki et al to stop the population focusing on the cities.

    Demand drives price, supply smooths it out. With enough demand in the regions the builders go To build. Still cheaper than auckland or wellington. Though why anyone would buy in a city where you can’t take a shit without meeting it on your next sea swim I have no idea

    • Phil 18.1

      Though why anyone would buy in a city where you can’t take a shit without meeting it on your next sea swim I have no idea

      Because that's where the jobs are.

  18. grant not robertson 19

    Perhaps you could devalue the housing market. If you can devalue currency then why not housing – just knock a couple of noughts off the spreadsheet – the vast majority who are merely selling then buying wouldn’t lose anything. The investors in the market, landlords etc, could be given the opportunity to sell up or get out, which just leaves the banks, who have only been given the additional liquidity for their lending by the Reserve Bank so they will only have ‘lost’ some of the income from future interest payments.

    • Pat 19.1

      "…which just leaves the banks, who have only been given the additional liquidity for their lending by the Reserve Bank so they will only have ‘lost’ some of the income from future interest payments."

      And there you have it….if housing in NZ was affordable (i.e 3-4 times median household income rather than 10) then the banks profit would more than half….and that is unacceptable (to the banks)

      There are other issues but you have identified the primary motivation…bank profitability.

  19. Grafton Gully 20

    Friends in the 70s built their own homes at the weekend and lived on site in a shed. Why not today ?

    • Pat 20.1

      Is doable in that its not prevented…but youll need 150 k plus for a section, and no access to mortgage money until completed….and youll be rorted for building materials

    • Castro 21.1

      Unfortunately, no. Have a look at the migration stats for Ireland compared to No Zealand. The ponzi continues ad infinitum when "we" just keep importing more hordes and heaping more fuel on the demand bonfire, while also using mass migration to keep a lid on wages… the Irish only really used one half of the pincer; the No Zealand underclass gets the full pincer movement, with imported slumlords from above and imported competitor serfs from below.

      • Pat 21.1.1

        Migration only prolongs it…those migrants dont increase NZ wages…if anything they decrease them, and it is local wages that ultimately support the ponzi.

        • Castro

          Obviously they decrease local wages… that's the point… just adds to the pool of renting serfs for the landed gentry. Bringing in both transnational capital and transnational serfs… what's the overseas-born population of Ireland relative to no Zealand?

          • Pat

            Renting at what rate?….why do we have thousands living in motels and billions spent by the gov on rent subsidies?…not because theres not enough housing (the ratios are better now than they were in the nineties)…because the local populace cannot afford the 'market' rents, and those rents are driven by house values.

            Unless the government is prepared to keep increasing billions in housing subsidies (which will destroy their operational budget and therefore credit rating/cost of money) then local wages cannot support those valuations….landlords will have a choice, rent at affordable rates or leave vacant.

            Some landlords will be in a position to leave their investment empty, but the majority are not and then the rout begins.

            • Castro

              How does the rout begin if the government continues importing tens of thousands of serfs to rent those properties, whether that be six to a room or three to a garden shed? Still better (for now) than the hellhole from which they escaped…

              • Pat

                The fact that by allowing that to continue means more and more NZ citizens are unable to enter the market…it dosnt matter which direction the government attempts to prop up the bubble it cannot be sustained….there are multiple triggers and attempting to prevent one only makes the others more likely.

                • Phil

                  the bubble it cannot be sustained… there are multiple triggers and attempting to prevent one only makes the others more likely

                  The NZ housing market is not a bubble in any meaningful sense. House prices are responding exactly as they should be, given all the underlying factors right now that are pushing up demand (favourable tax incentives, kiwi's returning from o'seas, markets awash with cheap money etc.) and restricting supply.

                  Pulling the plug on one or two of those factors might reduce the rate of increase, but there's nothing forecastable on the horizon that points to drastic house price falls.

                  • Pat

                    Lol…yep thats what they said in Ireland….right before the crash.

                    • Phil

                      The conditions prevalent in Ireland in the lead up to the 2009 crash bear little resemblance to NZ today. And, there were plenty of knowledgeable market observers calling the market a bubble in Ireland during the preceeding few years. (FYI – keyboard warriors here or on interest.co.nz do not count as 'knowledgeable')

                      We haven't had a construction boom bringing new properties on to the market. We don't have massive swathes of sub-prime high-LVR mortgages sitting on weakly-capitalised bank balance sheets. We don't have excessively loose monetary policy dictated from an ECB overly worried about German manufacturing.

                      There are, to be sure to be sure, significant risks to the housing market here. But they're not even on the same football field of crash-risk as what was happening in Ireland (and the US) pre-GFC.

                  • Pat

                    The prevailing conditions were very similar…a booming construction industry. ..check….positive migration…check…..poor regulatory oversight of the banks…check….tax breaks to housing…check….over priced housing stock…check….media spruiking of property…double check….political class supporting property values…check….loose monetary policy…double check.

                    "In its Annual Report, which was published just three months before the government was forced to unconditionally guarantee the deposits of the Irish-owned banks, the Central Bank said: "The banks have negligible exposure to the sub-prime sector and they remain relatively healthy by the standard measures of capital, profitability and asset quality. This has been confirmed by the stress testing exercises we have carried out with the banks".[25][26]"

                    Collateralised sub prime mortgages played no role in the Irish collapse

                • Castro

                  With the exception of an external shock, or the government dramatically reducing migration (and which political party or business group is clamouring for the latter? None that I can think of…), the only rout I see is social collapse, as the real estate Ponzi is considered simply too big to fail by "our" leaders… I assume you are also aware that non-citizens have voting rights in No Zealand?

                  • Pat

                    Interest rate increase, increase in unemployment, policy changes (both internally or externally) are a few that you fail to recognise….then there are black swans.

                    and social unrest will come before social collapse.

                    • Phil

                      Interest rate increase,

                      You can borrow 1-year and 2-year fixed from most banks for around 2.5%. The best 5-year fixed are is currently 2.99% and no-one's offering fixed-rates anywhere along the curve starting with a 4.

                      Even if rates do rise, they're not going to jump up to, cay, 6's and 7's overnight, or for the next 5 years. In the wildly improbable scenario they do go up fast, it will only be on the back of an absolutely booming economy and rapidly rising inflation, in which case there's no one who's going to be concerned about property markets crashing.

                    • Pat

                      @Phil…when interest rates increase it is the constraint placed on new entrants to the market, not those with existing fixed term mortgages….if the new entrants servicing costs increase the sum they can borrow reduces….what happens to existing property values?

                      The RBNZ are very cognisant of the impact of rising interest rates on property values hence their desire to manage interest rates lower….a battle they are having some difficulty with of late

                    • Castro

                      I opened with reference to your black swan: "the exception of an external shock,". What "policy changes" do you refer to? I think you are hoping for a rout but you fail to give any specifics about how it happens other than interest rate rises (more properties in the hands of fewer slumlords and a greater supply of renters and homeless) and unemployment rises (more homeless and accommodation supplement for the slumlords). "Positive migration" in No Zealand is more than double what it ever was in Ireland… a different beast entirely… are you failing to recognise the large-scale social decay all over "our" non-country? The social decay that leads to social unrest…

                    • Pat

                      A 'black swan event' is by definition unknown…even covid is arguably not a black swan because we were aware of the risk of pandemic, same with earthquakes etc….so, external events dosnt cover it.

                      Policy changes?…could be something the Gov announces in its (eventually) upcoming 'bold' housing reforms…could be anything, there are endless possibilities.

                      You think I am hoping for a rout….I am and i am not…the overvalued housing market needs to deflate but I am aware of the problems it will create when it does, however as stated numerous times it is going to deflate at some point so its probably best it happens at a time of our choosing so we can at least have a plan to deal with the fallout.
                      Ideally we wouldnt have allowed it to inflate in the first place.

                      And yes high migration is (was?) a problem for us in many respects and it dosnt help houses prices but migration per se is not the driver.

                    • Phil

                      @Pat – when interest rates increase it is the constraint placed on new entrants to the market, not those with existing fixed term mortgages

                      Interest rates aren't like a rubber band. Just because they've been relatively low for a long period of time it doesn't meant that they *must* go up some time soon. When they do rise, it will only be in conjunction with (or after) we see evidence of inflationary pressure rising in the economy – from things like rising employment, incomes, investment etc.

                      Also, most mortgage borrowing (more than 95% of the total $'s) is floating or fixed for less than two years, so the constraint of rising interest rates matters to existing borrowers just as much as new and prospective-new borrowers.

                    • Pat


                      Sadly you are again wrong…over 80% of NZ mortgages are fixed and the predominant term is 2 years….and as explained earlier that is not the issue….it is the new entrants to the market that determine value.

                      What is the value of an asset?…what someone will/can pay for it when its for sale.

                      Interest rates are indeed flexible…both ways, but there is something called the zero bound…and we are pretty much there.

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