Well, one out of three. I suppose that's not TOO bad. Could have been better though.
When I sat down at about this time last year to pen a wish list of things for 2021, the key three items were: vaccines, open borders and cooler house prices.
Most of us have now got the first of those (vaccine) geeing up our immune systems of course. And, depending on whether you are an optimist or a pessimist the other two are works in progress.
The reality is though, that the year will end with our borders closed.
Also, house prices may be showing some signs - now - of cooling. But REINZ figures to the end of October (latest available at time of writing) showed that in the first 10 months of this year the Auckland median price (a snip at $1.25 million) was up 20.2% on the December 2020 median, while both the NZ, ex-Auckland, median ($749,000) and the NZ median, including Auckland, ($895,000) were up 19.5%.
Unless you like a very hot bath, you aren't going to call that 'cool'.
Worryingly, as far as I'm concerned, this enormous strength in prices came as the kitchen sink was chucked at the market.
The Government extended the bright-line test (the capital gains tax that dare not speak its name) to cover sales up to 10 years and removed the beloved tax deductibility for interest payments for investors. The Reserve Bank reintroduced loan-to-value ratio (LVR) limits. Then increased them. Then started consulting about introduction (although not necessarily to be used straight away) of some sort of debt-to-income restriction. Oh, and I think there was more. But those things just mentioned should have been enough to put the market into a coma.
Instead it just rode on through. The people buying seemed to take the view that house prices (in the sense that they might ever fall at all - and of course they don't in New Zealand) would be impervious to anything that the RBNZ, the Government, or the global economy, could throw at them.
'Let us buy houses today - for tomorrow our carpets will be lined with gold.'
And so, 2021 has seen the already marked social inequities in New Zealand increase. No good will come from this.
I think the past period from June 2020 to now will be seen as a watershed for New Zealand. During that time the median price (REINZ figures up to October 2021) for Auckland has risen 34.7%, NZ, ex-Auckland 39.4% and the whole of NZ 40.1%. This in a market that certainly didn't look under-valued in May 2020.
I'll have more to say on this subject when I pen my thoughts on the coming 2022, but right now I see really only three possibilities: A sharp fall in prices - like a very big one, prices static for quite a period - say five years, or increasing stratification (with particular emphasis on the 'high' side of the market) as our borders are opened and we allow rich investors to buy the farm. None of those scenarios look appealing to me.
Perhaps the most remarkable thing is that this has all gone on during a pandemic. Or maybe it isn't remarkable. I have wondered darkly if some of the same forces that have prompted people to buy ridiculous quantities of toilet paper have also been present in the housing market. You could get deep here, but basically I'm referring to the whole psychological thing of 'seeking control' when there's something very much not in your control present in your life.
And lack of control of Covid, or more to the point letting the Delta variant in to the country was of course one of the more disappointing aspects of the year. That's if spending more than three months locked up in Auckland can merely be called 'disappointing'. I think it has aged all of us.
'Disappointing' also was the delayed vaccine rollout - demonstrating again that this Government is the worst in recent memory when it comes to actual implementation of, well, anything.
But most of us have got the jab(s), not a moment too soon, and it is making a difference. For now it's probably best to put the prospect/possibility that the new 'improved' flavour of Covid, Omicron, might render our jabs ineffective to the back of mind.
The resilience of the NZ economy in the face of the pandemic has continued to amaze. I think the housing market strength must be a major factor underpinning this. People feel wealthy. They spend. Our economy went from the cold of the Great Lockdown of 2020, to warm, then to hot, er and then to too hot.
And look what it has done!
You might not have heard of that. It was very 'popular' in the 1970s and 80s. Till they got rid of it. We thought forever.
Ah, but it was only sleeping. Mix in the vast amounts of stimulus money being pumped in around the globe with one heck of a supply chain disruption, then blend with an NZ shortage of labour due to closed borders, and away you go.
What quickly follows inflation? Why, higher interest rates, of course.
I give a chocolate fish to the folk at global economics researcher Capital Economics for their January 2021 pick that pricing pressures were going to force interest rates up. They were the first to pick this as far as I can see. Bear in mind that in January we were not far removed from the idea that the RBNZ might actually take us into negative interest rates.
Central banks around the globe expressed the sentiment that the global supply chain pressures would soon ease and inflation would be transitory. Apologies for me being a doubting Thomas on this one, but it always seemed likely to me that the touch paper had been lit. And that even worse than just inflation - we might end up with Stagflation, that worst of all worlds with rising prices even as economies start to stagnate.
The consequence of our rapidly increasing inflation has been mortgage rate rises, which will have been a completely new thing for a lot of people - given that the last time there was any concerted upward movement in mortgages was seven years ago.
It was worrying that seemingly a lot of people had convinced themselves mortgages would not, could not rise. This was part, I think of the whole 'housing is bulletproof' mindset that has descended on the country.
I was concerned about the impact of rising mortgage rates from quite early this year, but I would have to admit to being stunned at how far and fast the rates have risen.
So, in summing up the year, well, it's been another year given over to Covid really. The housing market was boisterously defiant and was, I think, the key reason why kiwis have this year been keen to keep spending and keep the economy ticking far better than expected.
For me though, the huge factor this year has been the re-emergence of the new-old kid on the block, inflation.
I think it's massive news and will prove to be the reason why, in the end history will show that it was not 'going into' Covid (in 2020) we should have feared, but 'coming out of it' and what that does to the global economy. Not good. I suspect. But that's going to be a story for next year and beyond...
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