Housing Minister Chris Bishop says New Zealand has to decouple its economic growth from house price increases, even if it is difficult in the short-term.
Speaking to reporters on Tuesday, he said the economic recovery needed to be driven by broad-based productivity gains and not increases in property prices.
“We've got to decouple the idea that the economy is linked to house price growth. It's not.”
“Destroying the idea that the New Zealand economy should just be based on house price growth is a fundamental formula this government is trying to embed into the New Zealand psyche and also into the arteries of the economy. It will take some time but I'm pleased with the process we're making,” he said.
Data released by the Real Estate Institute of NZ on Tuesday found house prices declined for the fourth consecutive month in June and were up just 0.3% from the same time last year.
Economists have pointed to weak asset price growth as one reason the Reserve Bank’s interest rate cuts have had a muted effect. Normally, falling interest rates lift the present value of assets like property, making households feel wealthier and more likely to spend.
But buyers remain nervous about their own job security and a big backlog of unsold houses means sellers have little leverage to push for higher prices. Real estate agents say an “oversupply” of housing has replaced the shortage seen in previous years.
Policymakers are also working to prevent the housing market from heating up again. The RBNZ now has additional tools to cap borrowing relative to property values and incomes, while the Government’s housing agenda is explicitly aimed at reducing prices in real terms.
Stephen Toplis, head of research at BNZ, said lower interest rates had stopped house prices from falling further but hadn’t put them on an upward trend.
“Household net wealth has flatlined since mid-2021. House value is the key component of this… With asset prices going nowhere fast it shouldn’t be a great surprise that household spending is doing likewise,” he wrote in a recent note.
Jarrod Kerr, chief economist at Kiwibank, said more cuts to the Official Cash Rate were needed to entice investors back into the housing market and kick start broader growth.
“More rate cuts are needed to stimulate demand in housing. Much of our optimistic forecasts for growth in the Kiwi economy into 2026 is predicated on a bounce in housing demand — It’s the Kiwi way,” he said in a note on Tuesday.
The bank forecasts house prices to rise between 5% and 7% during 2026 as investors become more confident and re-enter the market.
“Although we said the exact same thing coming into 2025. Unfortunately, the housing market has underperformed for longer, much longer, than we expected.”
Property and asset prices are just one channel through which monetary policy is transmitted.
More significant are the direct incentives to save or spend, and the effect on disposable incomes as interest rates change. Monetary policy also influences the exchange rate, the availability of credit, and expectations about future inflation and interest rates.
But the residential property market, which is worth roughly $1.6 trillion, has an outsized influence on how households perceive their wealth and financial security. If prices don’t rise, consumers are less likely to spend and invest.
Old habits die hard
Bishop wants to break this link. He said reforms were still underway but he was heartened by early signs of stabilization in housing costs.
“Rents I would characterise as flat to falling. There's now quite a bit of evidence coming through … that new rents are falling in some markets. House prices you could broadly characterise as stable, and that's a good thing,” he said.
“It frustrates me that, every time you open up some of the media outlets , there's a huge interest in things like, housing market yet to take off, and everything's characterized as: we need house prices to rise.”
The flipside of stagnant house prices was that it would be easier for first time buyers to get into the housing market. This should be “celebrated rather than bemoaned” he said.
Roger J Kerr, a currency expert, said too many economic commentators were talking down the economy.
“The local doomsayers just appear to be overly impatient and not understanding the transmission/timing mechanisms in the NZ economy from when the RBNZ cut interest rates until domestic spending picks up as a result,” he wrote on Monday.
“It takes over 12 months to have an impact from the time monetary easing is commenced. The RBNZ started easing policy last August, so from next month it is highly likely we will see an improvement in the retail and residential property sectors.”
The export sector was already booming, due to high commodity prices, and business confidence levels had climbed close to record highs. Kerr was still forecasting annual economic activity to reach 3% by the end of 2025, whereas RBNZ most recently forecast just 1.8% annual growth.
“It does seem that if house prices are not rising, the majority of the local economic commentators do not think the economy is performing. These are jaundiced and ill-informed attitudes that do not serve the public well,” he said.
63 Comments
Destroying the idea that the New Zealand economy should just be based on house price growth is a fundamental formula this government is trying to embed into the New Zealand psyche.
Would have never thought those words would leave Chris Bishops mouth. If Nat's are serious about this decoupling, then reinstate a Land Tax to replace that Muldoon removed. Force productive use of land, and stop tax avoiding speculation and over concentration of capital in land.
Was thinking the same thing. Not even Labour could say this publicly
OK and right there is the DGMer MONEY SHOT
SELL SELL SELL BABY
Agree, there's been lots of good talk in this space. But jaw-boning only gets you so far.
Spot on, though it is good to at least hear a housing minister acknowledge that continually rising house prices are bad, not good for the general economy and people’s welfare. But more action and tough decisions are required. Unfortunately I doubt this will happen because the cause and effect time lag exceeds the too short parliamentary term…
It started with Rogernomics. Up until then all governments had differentiated between an owner occupied property and everything else. The latter were categorised as businesses and as such finance was tiered by RBNZ control, colloquially known as the “corset,” at interest rates set quite higher than that of home mortgages. That regulatory oversight also provided definitive avenues for such as first home buyers by means of trustee savings banks, building societies, State Advancs and private solicitor lending. Rogernomics then dumped and lumped all property into the one big kit and caboodle. At the same time the then trading banks, previously barred from home mortgage lending were given a free rein, an open slather market immediately took hold and subsequent stoking such as introducing LAQC structures did the rest. And here we all are today.
It started with Rogernomics.
The Banking (Prudential Supervision) Act 1989 provided the legal basis for risk weighting practices. Actual application was structured via RBNZ’s Conditions of Registration for banks, effective in the early 1990s. This was centered on the Basel I framework, which assigned a standardized 50% risk weight to residential mortgages.
https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/publications/…
Did those words just come out of the mouth of a National government minister? However, home ownership rates in NZ started falling again when the current government was elected - they started rising again briefly during the previous Labour government. No idea what they were doing, but from the data it appears to have worked.
I'm reasonably confident that he is gaslighting you.
I need to watch the video to see if the words are coming out the side of his mouth , or worse, they are echoing off the wall behind him....
either way this is not a warning, he has realized that this engine of growth is dead so now he is trying to sell the fact that we must move away vs oh shit its stuffed and a dead horse
Yes I'd agree Te kooti - he is making the words fit the scenario of the housing decline. Still, good to hear.
Either way the statement is correct. NZ needs to promote other activity outside tax free flips on housing.
I agree wholeheartedly with this line of discussion. But, I'm not putting too much faith in it as he has not linked population growth or foreign investment to the issue. Both of these are acknowledged drivers (albeit not the whole or all the drivers) of persistent house price growth. It's governments who touted the growth as an economic sign, when it wasn't.
The point that Foxy made about how it used to work is where we should take it back to. Yes i understand that some of the consequences of the Free Market reforms took a few years to put in place, but they clearly did not work to the benefit of the country.
Has Roger J Kerr said where his 3% comes from yet, or is it just going to be repeated across multiple articles without challenge?
I've added RBNZ's forecast so that readers can quickly see it is an out-there forecast. Kerr may be talking about an annualised quarterly rate or something? Lots of people expect 3% annual growth starting at some point in 2026.
Perhaps you could be a real journalist, and research whether they're right, Dan?
Rather than reporting what different tea-leaf-readers are saying...
I'm telling you that real economic activity depends on energy and resource flows. Have any - repeat any - of those you mention, researched thouse or based their prognoses on same?
Nope.
Tea-leaves...
And obviously housing was the only remaining game big enough to lay growth-numbers off against - all else would have looked ridiculous. As First-World house-prices do now. The readjustment will probably be too big to withstand; 2008 x 4.
Yet, growth....
Good to see acknowledgement that driving down a significant household expense is likely to make us better off. No doubt there will be (currently is?) some short term pain but this is a good long term approach and I wish Bishop well.
I did not vote for the coalition and don't like everything they're doing, but I do like this. We need to grind landlords and land bankers into the ground until the old Kiwi single-minded investment strategy dies, and people actually start investing in things that will make the country richer and more productive.
Sounds good but if you were really serious about lower house prices you would retain all of the home building capacity available in the economy to focus on actual delivery of real physical outcomes - more houses.
For example, regardless of your ideology, you would retain the capacity of Kainga Ora which had built-up its delivery to 6000 homes a year in social-housing. An increase in social-housing tenants puts downward pressure on private rents. Downward pressure on rents drives out speculators and makes more stock available for first home owners.
You would ensure that the loss of 12,000 construction jobs and 800 business liquidations did not happen in 12 months in one sector while you were in government. That fiscal act alone will constrain housing supply in NZ for a long time. You would, also, retain the previous governments tax policies where they targeted property accumulation and speculation.
"Sounds good but if you were really serious about lower house prices you would retain all of the home building capacity available in the economy to focus on actual delivery of real physical outcomes - more houses"
Or you encourage many who have purchased rentals the past 20 years to sell them, thus increasing the quantity of homes available to become owner occupied dwellings. And the more that list, the more supply increases and the more prices fall and the less debt new owner occupiers have and the more they have to spend on other more beneficial parts of the economy.
One of the key issues we've had is people buying rentals when they really didn't need to - increasing demand of existing dwellings when they were for sale, increasing prices paid and increasing the quantity of debt owed to each new sale.
Basically greed has allowed the nation to dig itself into a deep debt hole and now we wonder why the economy is so slow when interest rates moderate slightly.
If we didn't have such a frenzy of people buying homes they really didn't need ownership of (but did so out of greed) then we wouldn't be in this predicament.
I don't see hundreds of thousands of people living in tents or the streets so clearly there are enough houses/enough accommodation in the country for the existing population - the problem we have is a complete misallocation of capital and the falling rates of ownership in recent history and the quantity of debt issued to those who do manage to buy their own first home. Further on my current street, the dwellings are 3-4 bedroom homes and about 80% are occupied by widows in their 70's and 80's (no joke - I have widows all around me...all in houses much to big themselves to which they need constant support to maintain). All of these houses are going to be available for sale in the next 10 years. If this is representative of the rest of the nation, then there will be no shortage of family size houses to buy in the next 10 years as the boomer generation move into retirement villages (of which 50% will be dead in the next 10 years).
It's all empty words. People are leaving NZ.
One of the main reasons they are leaving is because they can’t afford housing….or a reasonable lifestyle after paying housing costs
“More rate cuts are needed to stimulate demand in housing. Much of our optimistic forecasts for growth in the Kiwi economy into 2026 is predicated on a bounce in housing demand — It’s the Kiwi way,” he said in a note on Tuesday.
Well, it's long past time that it wasn't 'the Kiwi way'. If Chris Bishop is serious, well good on him. Prices need to stagnate for years to bring the earnings to price multiple down to no more than 5 and lower would be preferable.
Jarrod Kerr should be released to perform more useful work in the economy. Any suggestions?
Yeah he’s a joke.
The supply of land for new housing is tighter than a misers purse strings on a frosty morning. Until that changes the price of land and the house price multiple will be more elevated.
However the charges from govt cost a new house buyer 10 or 15 years on their mortgage. And some people are saying they want GST to increase to 18 percent. Crazy
The physical supply of land is there and, at least in our big cities, zoned appropriately. It's not available to build on because there's little cost to holding it and prices are based on anticipated future growth in value. Hence land prices exceed their current value (potential house price les building costs) and nobody is building.
We need LVR now, and preferably an LVT for national infrastructure too.
Obviously the mentality needs to change. Easier said than done is a poor cliche in this case though. You can’t change history but you can manage and change what history has created. Call it old fogeyism if you like but once upon a time the prime objective for NZ folk in purchasing a house was for the purpose of a home, a roof over the head of a family. Whereas the majority objective of a house purchase today is investment and/or speculation and capital gain. Introduce measures and incentives to break down and redirect that modern mentality then?
There was rapid and massive house price inflation in the 70s and 80s, missing out meant being left behind. Plenty of families were renting in those days
True but at least one government intervened, rapidly and effectively. Norman Kirk’s third Labour government legislated the Property Speculation Tax. That halted the speculation forthwith . So much so that Robert Muldoon kept it in place until well into his second term.
Auckland house priced tripled in the space of two years from 73 to 74/75 and didn't reduce. In the 90s I did a study of it
There was rapid and massive house price inflation in the 70s and 80s, missing out meant being left behind.
Between 1971 and 1974, real house prices increased by 60%. This rise was driven by a surge in demand, a run-up in immigration, and shortages in builders and materials. After 1974, the sharp rise reversed, with house prices falling in real terms for the rest of the decade. By 1980, real prices had returned to roughly their 1970 level, meaning the decade ended with little net real gain. This was largely due to high inflation, which eroded the apparent dollar value gains.
Over the same time period, the gold price in Kiwi pesos increased approx 1,200-1,400%.
The gold price increase was the result of ending the USD 35 fixed convertible rate in 1971
https://www.federalreservehistory.org/essays/gold-convertibility-ends
See my comment above, I'm talking about nominal
Nominal gains are completely irrelevant. It's what value you can buy, have left, when accounting for inflation losses, that actually counts.
Check the REAL chart of NZ property value.
Real Residential Property Prices for New Zealand (QNZR628BIS) | FRED | St. Louis Fed
Did Zimbabweans all become so rich, when a loaf of bread was Z$10 million ??
The coming reversion to the 2 to 3% annualized gains (wage growth) from 2001 NZ property prices will be a tough pill to swallow. 2010 prices are where we are headed.
Great graph. Interesting that real prices didn’t increase much between 1962 and 1994 - about the same length of time as the period since
It's one of those dangerous long term cycles that means a middle-aged or older investor may have only ever experienced a bull market in property. The challenge is being flexible enough to realise that and adjust when the paradigm changes.
100% the paradigm changed in 2021.
Many are ostriches with heads so far into the property bubble forever sand.
Sprucuvestors should not be surprised what the DDDebt Dragon bites a hole in there unsuspecting ass.
The chart really just stresses the point about what happens in a market when the regulatory authority (Government) is asleep at the wheel believing nothing can go wrong. There was so much unregulated, and add in other parts where they were betraying their constituents that this was inevitable.
In inflation adjusted terms, house price gains in New Zealand were non existent over the period mentioned.
https://fred.stlouisfed.org/series/QNZR628BIS
Looks more like a bubble in the 70's that popped in real terms.
Speaking to reporters on Tuesday, he said the economic recovery needed to be driven by broad-based productivity gains and not increases in property prices.
No shit.
Only because he knows there are no chance of an increase in property prices...... he is simply controlling the narrative that this is good, it is national plan and the Women and Horses should not be afraid of this plan... its aspiration meeting reality.
For NZ House prices, this is like the day the FED announced QE and USD fell 6 cents
This is massive the property recovery was dead but now its buried, and many speculators buried alive
Poor lamb, doesn't understand that economic 'growth' since the 1980s has been almost entirely thanks to the expansion of the private sector balance sheet. How have we done that?
We have piled into debt. Liberalised banks have pumped new money into the economy... that money has paid higher wages and enabled profits... and we have measured the resultant consumption / surplus as 'growth'. It's literally how we measure GDP.
Now, since the GFC, basically all of that debt expansion has been thanks to the increasing price of property. The housing ponzi is our debt creation machine. It is therefore also the engine of our economic growth.
Now, I'm not advocating for a return to the madness, but if not that, what? What's the actual plan for restructuring our economy so that growth comes from productivity improvements - eg infrastructure that reduces the cost of doing business and the cost of living? A road for Aucklanders to use for their weekends away ain't it, Chris. More word salad speeches, and embarrassing fawning over international bit players, from Luxout won't help either.
So, here we are feigning confidence in a recovery in the real economy with zero clue how that will happen or what to do. It's more hopium from the dopey'uns.
That s a very despondent post. Trouble is anyone giving any serious thought to the content could hardly disagree, including me for what it’s worth. A pyramid scheme of monumental debt, governmental, institutional, corporate and private. And here though, the pyramid is upside down on unsound ground and high winds are building.
the solution is essentially the Government having to relearn it's purpose. In a nutshell provide a structure for the economy to function in and regulate the markets to ensure efficient and effective performance, and no manipulation.
At the core would be infrastructure, providing and maintaining high quality road networks to support transport - Noting IT guy's comment below. But yes a cost benefit analysis if too short sighted will make them appear uneconomical, but they are vital for the economy to function, so most of the benefits will be intangibles.
As for the rest, understand how money functions in a modern economy, change the rationales and targets for taxation, support and maybe sponsor the development of manufacturing, and new industry to provide a high level of self sufficiency and resilience.
These are easy words, but they are big things and parts will not be easy to do. But they must be done. learn from China - 50+ year horizons, not three.
They’re not just building new holiday highways… they’re increasing the speeds on roads everywhere too (in the name of productivity), which further tells us that they can’t make evidence based decisions on how to improve the country/economy.
Oh no. Better transport for those carrying the majority of the tax burden, such that can afford an extra house at the end of that road. Oh the horror. More like the collapse of rail thru over unionized stupidity that has forced a pivot to trucking that need better roads.
If you had not noticed the cost benefit for 4 lanes to whangarei is already being openly questioned, NAct doe snot have the money for that folly.
Rail is dead in such a small country while fossil fuels are still so cheap
To be fair there has been no decent investment in freight rail for 100 years so of course it’s dead
JF when facing CRASH the best way is to get to the bottom as fast as you can, the only problem is that the debt load from the top will bring our banking system down, so instead we must face a lost decade or two. Japan has done it, china is entering and so are we.
As the Romans would say
Time for a Debt Jubilee , or in modern day language a total collapse of existing debt.
Stop it. The speu crowd have lauded themselves with endless "Im so greats" for decades. Let them eat their cake of debt...
And choak on it.
We have deleveraged from private debt of 155% GDP to around 140%. Thanks to an increase in Govt debt and a recession.
Getting private debt down to 50% is nuts. It would require a reduction in our bank balances of $390bn (two-thirds!) or an increase in Govt debt of the same. Or perhaps we will run a huge trade surplus for a few years? Unlikely. Needs a plan. Obviously.
Just engineer the corresponding price drop in land. Those over leveraged without supporting income support (speculators) ...so sorry.
the asset remains on the bank balance sheet.... until the write down after the debt writeoff....
so you either put up with lost decades or nationalise the banks.... hobsons choice really
The 6 years under Lab Grn and TPM felt pretty lost as you were watching tax being wasted left and right. If you were a recipient of political helicopter money you probably thought it was great, especially it you paid no tax.
Now we need a full disclosure of where all the 3 waters money went that was given to councils. They got it before the initiative was cancelled, so what pet projects did they pilfer it for.....
The government also exacerbated the increase in household debt by running low debt on its balance sheet and boasting how clever that is. Now look at the state of the country's infrastructure as a result. Hundreds of billions of dollars behind.
My god.......what abhorrent heresy from a leading NZ politician.
Throwing the now walking dead, thirsty and starving NZ Housing Ponzi, under the unforgiving Abrams Tanks tracks!!
= This won't just break the sick, flea bitten NZ housing market legs, it will grind them into dust!!
How will the formidable and nefarious Ashley Churchless and the Oneroof Coven react??
I am seeing tortured Chris Bishop Voodo dolls and fervent praying to the money gods for his return to the property pumping podium......as has been the case up to 2022 for all politicians.
Good on ole Bishop, for breaking the property market protection squad mold of bygone polys and sicking the DDDebt Dobermans on the Property leveraged monkeys!
Watch the property worm, head well SOOOOOUUUUTH:)
was waiting for your comment...
they will not rebutt the un rebuttable
they will ignore it and hope that everyone else does as well (most home owners do not want a bar of this narrative)
deny deny deny
As we can see, from all the major property crashes over the last 50 years, 6 years is the golden number until either a bottom is found, or a recovery is taking shaky baby steps from down in the hollows.
Unless your Japan......whose decline in the stuff of stretched economic downslope legend. Until NZ ....
China is going to make all who went before them amateurs .... they are so farked
everything was funded by building more, now there is no money to even collect the garbage, Xi is being replaced and the military is now under control of the military faction of CCP, not to attack Taiwan, to turn inwards and control unrest
The youth league of CCP and military faction of CCP will demand reform, China will soon have a Government that looks like Vietnam with elected representation but perhaps 20-35% CCP appointments.
Because housing has fallen so much more then official figures banks are being forced to finance mortgages at near official numbers vs the real price 40% below , this is causing mortgage fraud where the seller and buyer are colluding to sell at higher number and the buyer defaults , with the 40% difference split and every one runs away (bank looses....)
Chinese love to scam the game.... its such a mess over there...
This comment will not age well.
Let us see, in Oct 2021 not many saw a top.
Xi is already replaced , he has no power within the CCP Military, all his personal proxies have now been purged by rivals. Xi is now a figure head, that will figure less and less, while the CCP negotiates between factions who is a compromise candidate and will lead next. The funny thing is most of the world will ignore this due to Face with their major trading partner... China. The Bubble bust on his watch.
Putin on the other hand will be feed to the dogs in full public view. ( or... if there is a lot of desire to change maybe a plane crash or a "Heart attack"). He popped the bubble himself, silly man.
Trump will simply be a replaced, as he will be reselected by the republicans his most likely replacement will be whoever the Democrats stand.... What we are seeing is the replacement of bad leadership by three different systems...all at the same time! Trumps big beautiful bill is about extending the bubble beyond the next US Election.
its a great experiment, I rank them
Russia last... Russians are a proud country with an amazing history of trying to select the best form of government for that time, but what a mess they have been since communism collapsed.
Its hard to rate either USA or China as a better system, I think the rich in the USA have taken advantage of the opportunity China offered.....
Whatever country, Mr George Orwell summed up the respect power has of the masses,
So long as they continued to work and breed, their other activities were without importance. Left to themselves, like cattle turned loose upon the plains of Argentina, they had reverted to a style of life that appeared to be natural to them, a sort of ancestral pattern. Heavy physical work, the care of home and children, petty quarrels with neighbors, films, football, beer and above all, gambling filled up the horizon of their minds. To keep them in control was not difficult.
NZs Natural pass time has been to Gamble on Property, everyone's a winner baby! Its been a sweat run for politicians until it was not..... By Sept of 2023, Labour had no chance for so many issues, but the bubble had bust on there watch...(Oct 2021) And the people voted.
One needs to be sceptical when watching YouTube.
You forgot the mention the downward demographic spiral
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.