BNZ's economists are forecasting a 12% drop in house prices and an even bigger decline in the construction of new homes

BNZ's economists are forecasting a 12% drop in house prices and an even bigger decline in the construction of new homes

BNZ's economists are picking house prices to decline by about 12% and construction of both residential and commercial properties to decline.

In the bank's latest Economy Watch report, which focuses on the construction sector, its economists say that construction may not remain as strong as many people are hoping.

Residential construction in particular, could be adversely affected by lower population growth, heightened unemployment, Airbnb properties being converted to residential rentals and weaker house prices.

"The rising unemployment rate is the biggest downside risk to both residential construction and house prices," the newsletter says.

"We have noted many times before, the changing cost of finance (namely interest rates) only tends to affect the marginal buyers.

"In contrast, a rising unemployment rate is lethal for the housing market.

The supply of housing could also be increased as tourist accommodation is converted to residential use.

However, lower population growth, from reduced immigration, is likely to have the biggest impact on housing construction, the report said.

That could see the number of new dwelling consents issued fall to 20,000 to 25,000 a year, compared to 37,606 in the 12 months to March this year.

"All of the above will likely result in a drop in house prices. A decline of around 12% is our best pick currently," the report said.

It also said that non-residential construction work is also likely to take a hit, but not as severely as residential construction.

"As the existing work reaches completion, it's hard to see where new demand might come form in the next year or so," the report said.

Construction of tourism-related  properties such as hotels would be hardest hit, but shops and restaurants will also be affected.

"The shops and restaurants sector will be afflicted by the drop off in tourists but in addition, overall spending growth will be hampered by rising unemployment, falling house prices, reduced residential construction, and near term, a drop in wages.

"This is likely to impact discretionary spending much more than non-discretionary," the report said.

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240 Comments

22
up

This is just the start. Read the headlines from the bank economists in Ireland from 2007 onwards to see how it plays out.

https://quotesfromthebubble.blogspot.com/

44
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And if the bank is publicly saying 12%, you know behind closed doors they are thinking 20% is a real possibility

23
up

Totally. And with Adrian Orr and the Big 4 CEOs reminding us how solvent the banks are every time they get in front of the press, you do start to wonder.

Are they solvent? They have a lot of liquidity on hand but it would be an error to confuse liquidity with solvency.

12
up

Solvency is an issue if they have to write down the value of their assets (house prices fall). Liquidity is an issue if borrowers aren't repaying their debts (unemployment rises). Both will be of concern to the banks right now.

Especially with the bail in rules for depositors

And if the bank is publicly saying 12%, you know behind closed doors they are thinking 20% is a real possibility

Running a bank is like operating continuous propaganda campaign. With today's sentiment measurement analysis tools, you can measure the optimal response, say from any proprtion from -12% to -50%. Naturally, -12 sounds better than your -20. And of course, -50 would never happen (in a bank media release anyway). Fortunately, the probability works in their favor by stating -12 compared to -20. If the data a few months down the track supports their forecast, more people believe in them.

House prices might well fall by an average of 12 percent (or more/less) on the back of Covid-19 - but that would pale into insignificance compared with the price gains of the last decade.

The real surprise will come with the strength of the recovery - the underlying motivation to own the roof over one's head remains unchanged.

Those with a long-term perspective on the housing market, such as the majority of investors, will be unfazed. They simply ride out recessions, thankful that with their property assets they remain relatively secure.

TTP

40
up

We understand, Tim. You lived in a charmed time and made money off centrally-supported house price rises. Congrats.

Edit: correction.

10
up

Only for those that bought in the last decade. What's the average holding time for a property there days? It used to be 7 years. I suspect it has been less than that until now. So MANY people won't be able to ride out any fall of significance if their financial circumstances have varied.
After all, you'd know, the market prices for property are determined by yesterday's sales, not those 10 years ago.
So reflection on days gone by is not going to insulate a lot of New Zealanders. Some. yes. But not most.
Oh, and what's the chances Negative Gearing and other housing incentives get the chop with the amount of new debt we're dealing with? Pretty good I reckon!

13
up

'Only for those that bought in the last decade. '

You nailed it. If I was being fussy, I would add 'but not in the last 3 years'.

Many have obviously done very well out of property. TTP, Houseworks, Yvil.
But that's a historical thing.

Looking forward, buying property TODAY does not look a good investment, unless you can manage to get an exceptional bargain.

If you have a good safe business, you are what the banks want - badly. As such now actually is time to save hard and buy your own asset and free yourself from the never ending rent increases. In ten -fifteen years you will own it.

Yep.
I'm not at all saying it's a bad time to buy. It's a very good time for FHB's if they have secure jobs.
I'm talking about property as an investment beyond the 'family home'.

10
up

Ten-Fifteen years? For most FHB 20-25years. Income growth has been low for a while, I don't expect it to suddenly surge forward in the midst of a recession.

Yeah, and when house price increases are bandied about, there's rarely an inflation adjusted figure spake let alone an opportunity cost consideration.

Yes it's not the 70's or 80's where you swallowed some high interest rates for the first couple of years but then wage inflation did its magic and halved the debt burden in the space of 5 years.

"House prices might well fall by an average of 12 percent (or more/less) on the back of Covid-19 - but that would pale into insignificance compared with the price gains of the last decade."

TTP,

There are different readers here in vastly different financial circumstances:

1) owner occupier with zero or low leverage / zero or low debt service ratios - due to having benefited from rising prices
2) owner occupier with high leverage / high debt service ratios - those who may not have benefited from rising prices and may lose a large unrealised chunk of their initial equity deposit, and are potentially financially vulnerable to a downturn in prices
3) potential owner occupier buyer - those who have not benefited from rising prices and may lose a large unrealised chunk of their initial equity deposit if they buy at today's prices.

It looks like your comments are really meant for those in category 1. This is likely the category that you are in (as well as your vested financial interest as a real estate agent benefiting from transactional activity).
There are many readers here in category 2, and category 3, where your comments may be very unsuitable.
Many other commenters on here are speaking to people in categories 2 and 3, not category 1.

If your financial circumstances were similar to those in in category 2 or category 3, then your perspective and outlook might be very different.

A reminder for all potential owner occupier buyers - choose your scenario and act accordingly.

Which will the owner occupier regret most:
1) missing out on future potential gains in equity?
2) potential loss of their savings invested as the initial deposit for purchase of the house or even potential negative equity?

For owner occupiers, a reminder of the impact of leverage (it amplifies property price changes both on the up and down):
Scenarios of financial impact of leverage on equity, assuming an 80% LVR for owner occupier, for a recent $1,000,000 property purchase, $200,000 initial deposit, mortgage $800,000. (simple round numbers used for illustration purposes)

A) Scenario - property price rise:
1) property price rises 5% to $1,050,000, mortgage $800,000, equity $250,000, so 25% gain in equity value from $200,000.
2) property price rises 10% to $1,100,000, mortgage $800,000, equity $300,000, so 50% gain in equity value from $200,000.
3) property price rises 15% to $1,150,000, mortgage $800,000, equity $350,000, so 75% gain in equity value from $200,000.
4) property price rises 20% to $1,200,000, mortgage $800,000, equity $400,000, so 100% gain in equity value from $200,000.
5) property price rises 25% to $1,250,000, mortgage $800,000, equity $450,000, so 125% gain in equity value from $200,000.
6) property price rises 30% to $1,300,000, mortgage $800,000, equity $500,000, so 150% gain in equity value from $200,000.
7) property price rises 35% to $1,350,000, mortgage $800,000, equity $550,000, so 175% gain in equity value from $200,000.
8) property price rises 40% to $1,400,000, mortgage $800,000, equity $600,000, so 200% gain in equity value from $200,000.
9) property price rises 50% to $1,500,000, mortgage $800,000, equity $700,000, so 250% gain in equity value from $200,000.
10) property price rises 100% to $2,000,000, mortgage $800,000, equity $1,200,000, so 500% gain in equity value from $200,000. (i.e if they believe that the property price doubles every 10 years)

Remember, the owner occupier must be able to hold on under ALL economic environments (including any potential significant reduction in household income).

B) Scenario - property price falls:
1) property price falls 5% to $950,000, mortgage $800,000, equity $150,000, so 25% loss in equity value from $200,000.
2) property price falls 10% to $900,000, mortgage $800,000, equity $100,000, so 50% loss in equity value from $200,000.
3) property price falls 15% to $850,000, mortgage $800,000, equity $50,000, so 75% loss in equity value from $200,000.
4) property price falls 20% to $800,000, mortgage $800,000, equity is ZERO, so 100% loss in equity value from $200,000.
5) property price falls 25% to $750,000, mortgage $800,000, equity is NEGATIVE $50,000, so 125% loss in equity value from $200,000.
6) property price falls 30% to $700,000, mortgage $800,000, equity is NEGATIVE $100,000, so 150% loss in equity value from $200,000.
7) property price falls 35% to $650,000, mortgage $800,000, equity is NEGATIVE $150,000, so 175% loss in equity value from $200,000.
8) property price falls 40% to $600,000, mortgage $800,000, equity is NEGATIVE $200,000, so 200% loss in equity value from $200,000.

Very good post in the double side of leverage. Most interest only debt stackers have no insite about negative equity, and how quickly a low deposit can...evaporate.

If you end up "underwater", dont loose your job or tenant.

It's actually scary. Imagine using unrealized gains to further extend ones liabilities via deposit recycling, only to discover that while housing itself is not a commodity, house prices through monetary and central/local Government policy (or lack of) are behaving like commodities.

No shortage of tenants I guess?

In the early 90's I worked for an insurance company in London. There had been a negative equity property situation, mortgagee sales etc. Banks sold loans with "mortgage" insurance, but this insured the bank not the borrower. Insurance company I worked for paid out the bank (who didn't care what value they got at mortgagee sale as they were insured against loss) and then proceeded to reclaim their loss against any other assets the borrowers had. Negative equity losses don't necessarily stop at the equity amount.

12
up

Welcome back Tim!

What your view this week on landlords giving rent relief?

My landlord proactively gave me a 20% discount for the next 6 months :)

Hi thegic,

We're in the same boat.....

My landlord has given me a rental discount too.

I'm going to put the saving towards buying my own home. (My landlord says that's very sensible.)

TTP (Tim)

17
up

*pulls_herself_away_from_screen_briefly_to_get_popcorn*

Hey Tim,
Is that what you are saving for? Not bad for Palmy North.. a bit Gold Coast wannabe IMO
https://www.trademe.co.nz/a/property/residential/sale/listing/2437410206...

Oh? What about your properties in Picton and Palmerston North?

Your landlord is a very kind fictional character

I've heard people jokingly refer to their wives as the Chief Financial Officer, perhaps this a similar joke in the REA profession?

11
up

His "landlord" is a euphemism for his Bank.... i.e. the ultimate owner of his assets.

11
up

I think you should give it back given you and your firm are so opposed to the idea

https://www.scoop.co.nz/stories/BU2003/S00556/property-brokers-responds-...

11
up

I paid my full office rent for the first half of the lockdown. When they noticed what I was doing, my landlord reduced it by 50% for the remainder of the lockdown. Turns out we're both decent people.

With the OCR near 0%, what’s going to drive up house prices over the next 10 years?

That is exactly the point - the only thing left would be increased wages. But everyone is taking paycuts or losing income completely. We are also at risk of higher taxation to pay for the debt burden the government is creating.

If house prices do end up going higher, it is simply creating a disaster worse.

That's a very very important point. Unlike the past, there isn't much if any room to cut the OCR in the future.

Maybe Labour will cave in and change the rules on Overseas investors. Worked like a charm for National for 9 years. After saying no to CGT, that would be an another hit to the people and generations labour was suppose to help I wouldn't be surprised if they are relaxing the rules. I hope not. Mom and Pops have had their chance

That would be the worst outcome for Kiwis working and paying tax in NZ. It is a major policy differentiation to Nats and Ximon. Debt ponzi in NZ needs reducing, just get on with the reset and let all the speculators and bank profits experience negative leverage.

Keep NZ for tax paying kiwis, and promote elimination of debt enslavement. if Lab champion that they will hose in.

Maybe the better tack is to invest in education, affordable housing, and supporting productive enterprise rather than having pretend economic policy that depends entirely on pumping house prices, encouraging money laundering and dragging feet on AML, and importing nominal GDP.

HOPE

immigration of course. rich people who want out of places.

Fourth edit for the day was it TTP?

Warning . Self Interest posting . I smell an investor or agent

Relatively secure albeit totally illiquid in this economy. Hope they dont need cash anytime soon

29
up

100% correct, Pragmatist. I am no expert, but a 20% decrease in house prices is what I have been saying all along since this pandemics started. The estimate by BNZ, while more realistic than the ridiculously optimistic forecasts of 5% to 10% drop advanced by commentators with vested interests in real estate, is still off the mark - and BNZ knows it.
I think it is going to be 20% decrease this year, and another 10% in the first part of 2021. All together, we are talking about house prices being a third less than current values in 12 to 18 month's time. And I think I am being moderately optimistic, as risks are more on the downside.
Not difficult to predict, considering the many over-leveraged house owners who bought into this housing Ponzi scheme, the currently ridiculously inflated house prices, and the high level of unemployment that is going to hit us. The music has stopped. If there was an easy way to "short" the housing market, I would do that with both hands. There are more than a few friends and colleagues of mine who have almost reached panic mode and are thinking of selling.

F what do you think of the very precise / prob very inaccurate -5.49% that came out last week.

If the people that published that figure to 2 decimal places have any influence on anything in finance we are stuffed.

LOL very true, sadly.

16
up

If you are a property investor, the way to short the market is to sell now and buy in again later.

If you are an REA, they way to short the market is to retrain in another profession.

If you are a potential FHB, it's to wait.

If you are a home owner and can be bothered, you can sell, rent for a bit and then buy back in.

You could short property related stocks but it's tricky business.

Also if you are a owner occupier:

1) who will be using the equity in the house as the main source of retirement funds, and
2) expecting to downsize in the next 5 years, (or before house prices are expected to fully recover to current levels)

then some may wish to review their situation, in order to maximise their retirement fund for the future.

Hi Ginger (my favourite ninja),

So, I take it you'll be selling up in Wellington, despite the very long time it took you to find a suitable property there.

How about you contact me directly (since you've found out who I am)........

We can then negotiate a price together and then you can avoid oily REA's - and their huge commissions.

We'll both be winners!

Tim (TTP)

Hi "Tim",
I can't claim those bragging rights alas! It was someone who goes by the handle "Sam Roma" on youtube who claimed to know you. But they did also seem to know one of my online identities too, so have been somewhat exposed myself. Internet high jinx eh?

And yes, as you accurately state, I spent ages finding the right home. I have since put blood, sweat and tears into the project (its not even finished yet) and the only way I am parting with it, is in death or destitution! But then, I didn't need to take on a whopping debt to buy it, so have the luxury of not having to worry too much about property prices or shorting a market, right now.

I must confess that I am not entirely sure you really are Tim and that you are not just messing with us ;-)

The comments section has turned into speed dating.

bahahha

For morons

Hi Ginger (my favourite ninja),

Good response. May you exist a long time on Planet Earth!

I gather quite a few people know each other's identities here - and assumed you knew mine??

Anyway, it's the quality of the contribution that should count most for readers - not the identity of the contributor.

Nonetheless, privacy is likely very important to many readers here - and this site clearly takes very seriously its responsibility to safeguard privacy. That, in turn, gives contributors the confidence to contribute.

Tim (TTP)

26
up

Lots of houses have gone up 100% in the past few years but if you suggest they could drop by 50% (back to normal) due to a global pandemic people think you are nuts?

29
up

Say it with me: "house prices always go up"

Now repeat until you believe it or at least get a job writing for the Herald...

13
up

Is it a sacred cow or a fatted calf?

House prices are a fat sacred white elephant.

Perhaps the link with politics is the real issue.

Along the lines of, 'Destroy the value of my most valuable asset and I vote you out."

Absolutely Ralph.

Does anyone know if workers at RBNZ have to put assets into blind trusts to work there?

I mean if you know interest rates are going to fall or rise, or there is new policy coming up/out, and you buy/sell a house, is that considered insider trading?

How much property do you reckon Adrian Orr is sitting on?

That being why the younger generations don't take National's crocodile tears re "mortgaging our children and grandchildren's future" seriously.

They do always go up, if you track long term trend lines. So do equities. Envy is no substitute for reason.

It's also worth calling out the backwards maxim in NZ that promoting more expensive shelter relative to wages is bizarrely linked to an 'optimistic mindset' and a 'strong market'.
However wishing for shelter to get more affordable relative to wages is somehow seen as a 'pessimistic' or 'doom and gloom' mindset.
It's amazing how effective messaging from the banks, real-estate agents and the NZ herald has been on the sheeple.

20
up

I'm guessing 30% to 50%.
30% most areas, tourist towns 50%.

15
up

Always been fascinated with percentages and cumulative effects.

Make sure you use some absolute figures too.

$300,000 up 100% to $600,000
$600,000 down 50% to $300,000.
Notice how the % differs.

Try $500,000 house up 20% to $600,000
$600,000 falls 15% to $510,000.

At 12% decline from a high has a greater absolute change than a 12% increase from a low.

Exactly. NAB even came out and said 30% in Aus but tried to say it was a less-than-10% probability scenario (as if they know that). For them to put that number out there, you know internally everyone is running for the lifeboats.

Complete garbage, if that were true they would not be doing anything above 60 percent LVR

Not necessarily Pragmatist, banks are inherently conservative, which means they will overstate the downside.

Million dollar mortgage around $600 a week interest only. $500k $300 a week. I think the average FHB mortgage is $400k, and the average new mortgage around $250k, so the vast majority of households will be able to cope over the short to medium term. And when interest rates do rise, it will be in response to inflation, which will eat away at the principal. I suspect a lot of the property haters on this site are motivated by envy of those who’ve made a fortune over the past decade. Prices will fall, we all know that, then most likely stagnate for a while, and there will be young people with negative equity for a period. But time will right that ship.

Burnt toast.

Envy? Yeah, I wish I had negative equity in an environment where anyone could lose their job overnight. LOL try harder spruiker.

11
up

I made a fortune in real estate, and on sound analysis I dumped the lot 5 years ago. The proceeds have been invested in much more productive assets since (with a 100%+ p.a asset value growth rate). No, nothing speculative, just a regular business that looks after its clients, services a need, works hard to grow and produces a fair risk return on capital and equity.

16
up

Hold on tight to your dream. The housing nighmare is waking up!

17
up

I sold literally hours before lockdown announcement....
I definitely am not buying until years end at least. Will keep looking to get a feel in my area in Silverdale but wont be buying till at least years end and anyone who has their head screwed on will be holding off and waiting the market out too.

Has Settlement happened yet?
Some, who thought they'd Sold! may find come time to swap the cash for a title, it doesn't happen - for one of many reasons ( joblessness; bank reluctance; values don't measure up etc )
"You haven't sold anything, until the cleared cash is in the bank!"

Then ill be up 100k when i keep the deposit haha

Let's hope that's enough to compensate for the '12%' deterioration that's expected in prices!
A Million dollar house that drops 12% has already gobbled that insurance policy up ( NB: you might want to check the fine print on what 'outs' the buyers' have in case of default. Force Majeure ( Unforeseeable Circumstances) sometimes allows the deposit to be refunded)
Trying to enforce a Reluctant Buyer to fulfil the contract can be harder in practice than it seems on paper.

BW, ill let you know in one of the 90 seconds at 9 week after next how settlement goes haha. Fingers crossed.

Just sold last Thursday, which means I locked in my purchase based on an offer I made in early March. The offer I received sat in the middle of my expectations price range for my sale in February. Not worried about market movement, as I plan to be there for 20 years+. I have a place to live and have a small (by today's standards) mortgage, and so long as my employment holds up (which it probably will) I won't be thinking about property values for a very long time. Timing the market is a mug's game. Even the Oracle of Omaha doesn't do it well.

So...you've signed up for a new place and haven't settled on the last one you sold yet? Brave! ( see mine right above)

The purchaser works for a bank, so I'm not too worried.

The Oracle of Omaha is currently holding half his portfolio in cash right now. So.......

Congrats

Most of the issues with residential lending will be pushed out by 6 month loan holidays and many of the loans that will be distressed won't be know until businessess have reopened (i.e. no more subsidies) and had time to guage their new staffing requirements. I'm seeing lots of large, well established businesses shed the first 10-20% of their employees as an interim precautionary measure and I expect smaller businesses will be harder hit.

10
up

Very clever move. Selling just before lockdown, at the apex of the housing bubble, was a very financially smart move.
If you have not finalised everything legal yet, do it as soon as you can.

I got lucky too and sold in Nov, settled mid Jan. It really is such a relief, particularly so with the whirlwind we find ourselves in now.
I really do feel sorry for FHBs that have purchased in the last 6-12 months, they may end up suffering badly from a problem that was not their creation.

Sorry Solve_it and Mods - I accidentally clicked reported this and then the 'don't report' button disappeared. Stupidity on my part.

But to the point, I'm a recentish FHB and not super thrilled about the prospect of negative equity - we have a plan for the next few years that involves staying where we are, so we'll likely look to refix low in a year's time and ride it out for the foreseeable. It's all we can do really, bar direct relief. But given society at large expected us to pay stupid amounts for a three bedder starter home as well as student loans etc, I'm fairly resigned to being collateral damage.

What will bust my grits is when the inheritance I'll be even more reliant on now to help right the ship gets subjected to taxes because my family members had the sheer audacity to, you know, die. It does make you feel like doing the right thing (holding off on start families, buying a small home and taking on a responsible mortgage) is ultimately a mug's game.

Doing the right thing is a mugs game. Did you only just realize that!

My wife and I discussed selling the house cheap, as we didn't agree with prices being so high. Then we realised a $60k discount was a $60k reduction from the inheritance of our children, who also need to buy a house one day. And so the wheel keeps on turnin'.

I'm really sorry GV. That seriously sucks

10
up

Very, very true. Many of them are young, productive families starting a new life. I do hope that most of them will cope. Their only fault was to believe in the too many self-serving commentators peddling the housing Ponzi scheme.

If nothing else they will learn a very long lasting lesson. Similar to people from other countries who have lived through housing bubbles, yet many are in denial to here. As I have said before, I lived through the GFC in America and it has left a lasting impression that was missed by the average NZ given our behaviour the last 10 years.

yeah it seemed to have a long impression on those americans too, they now have more debt than ever before.

10
up

From 6% to 12%. Happy Realization.

If BNZ economist says (Have to say) 12% can understand how bad it will go.

Next update from 12% to..... should be announced in July/August.

11
up

"A decline of around 12% is our best pick currently"

Says it all, really. There are many commenters here that have better figures and reasoning to explain their conclusions than the so-called experts.

Interesting to speculate what the message might have been if T. Alexander was still economics commander in chief at the BNZ...

14
up

Minor slow down for 6 moths, then BOOM.

Interesting to speculate what the message might have been if T. Alexander was still economics commander in chief at the BNZ

He recently was talking about a boom in consumer spending last week, particularly for home renovation materials. It was based on a survey that he ran among respondents recruited from those who subscribe to his own newsletter. And this is a publically recognized economist.

Having seen him perform on stage to his followers, I always thought he’d make a great ‘Shylock’ - perhaps when the theatres reopen someone will offer him the gig.

he could become a stand up comedian, riffing off the whole housing crash

Don't think he's got much sense of humour, though

What colour had he dyed his hair when you saw him ?

Listening to him on ZB with Simon Barnett going on about how much the people love listening to him aint positive. He tells (desperate) people what they want to hear while claiming to be an independent economist. Looking at his employment history shows he is not independent.

19
up

how dare they, dont they know the NZ housing market is different from the rest of the world.
or so i have been told so many times since 2009

And they have been right since 2009.

Actually for much, much longer than that, more than 30 years actually, but they say "this time is different"

What have interest rates done in that period Yvil? And have you ever looked at the full history of interest rates? (i.e. hundreds of years).

IO, Interest rates have gone up during the biggest rise of house values from 2002-2008 and interest rates have gone down during the next biggest rise in house prices in 2012-2017

Ok I said look full history and you went straight back to the last 30 years so you could continue to drown (or gleefully stare in the mirror) in/of your own confirmation bias.

2 points on that: there is little further to cut and unemployment is far more influential in depressing buyer interest than affordability of interest rate

Whats your prediction Yvil? 1 year from now?

As I commented before, I think times are just too uncertain to make an accurate prediction and I'm not interested in making a guess. It will be a tug-o-war between business closing down + people losing their jobs VS lower interest rates, money printing, no LVR's, mortgage holidays

You forgot to mention the stalled immigration for the next couple of years.

30 years is a relatively short period of time. When you look at the anomalies that occurred prior to that period with the global reserve currency going off the gold standard in the 70s ( I.e the birth of modern day alchemy) and ever decreasing interest rates for the last 40 years. People talk about the low interest rates now but as we know low interest rates have never been good enough, they need to always go lower which is indicative of an unproductive, unsustainable, pyramid scheme.

it has changed due to the issue of debt changing from thirty years ago, its much easier now than it was thirty years ago, i remember dressing up to meet the bank manager and him going over my finances with a fine tooth comb, and as for going to a bank you didnt have an account at forget it
so i dont expect house prices to fall far maybe 10% then it will recover.
we may have more unemployment , lower wages and spending for a awhile, but debt creation will carry on and banks chasing debt clients is the main game now

End of a long debt cycle - Dalio thinks people start using leverage like a gambler. Banks become casinos. NZ and Aus property markets the last 10 years - everyone loading up with debt assuming prices will keep rising.

Wow you could not possibly have a more inverted understanding of what's happening.

11
up

Hold up. Hold up. I just heard on the radio that Wellington prices are actually going up! So BNZ must be wrong. /sarcasm

Presumably that 12% estimate is a nationwide average. So if Auckland, Queenstown and some other tourist/bach spots drop 20% then Wellington, Hamilton, etc., might get away with less than 10% drop.

Yeah I assume that is a nationwide average too.
Even in Auckland there will be great variety. My picks:

- Auckland CBD: Down 20%+
- Auckland $1.4 - $2 million market - down 15-20%
- Auckland $900K - $1.4 mill market - down 15%
- Auckland 700K - 900K market - down 10%

So overall I'd say about 15% down in Auckland

Wellington won't drop much if at all.

Hamilton - 8-10% drop

Tauranga - 15% drop

ChCh - 8-10% drop

Queenstown / Wanaka - At least 25% drop

All of the above assumes the OCR does not go negative
If it goes negative I would halve these forecast falls.

Wouldn't that bring Auckland and Wellington prices almost inline? Hard to imagine

'Hard to imagine'. Don't know about that. Wellington has got a huge public service, remember, on very good wages with excellent job security.
And it's pretty much built out.

Add to the list, the ongoing housing shortage in Wellington caused by years of supply woes, further worsened by the city's inefficient council and the Kaikoura earthquake.
A recession alone is unlikely to relieve the city of its accommodation shortage since department and agencies won't be laying off its well-paid staff and the large majority of Wellingtonians are permanent residents or citizens of NZ.

Yep. You'll struggle to pay your mortgage long before they struggle to pay theirs.

Not for me! I have never been able to fathom why anyone would live in Auckland let alone pay all that money to live there.

Sorry Aucklanders. i'm only teasing. Just engaging in the great Kiwi Welly vs Jafa tradition ;-)

The next move is for a Jafa to say something about a big earthquake. To which Wellingtonians counter about our superior hipness, to which Jafa's will mention the weather to which Wellingtonians mention how you guys spend 2 hours commuting per day whereas we can walk to work.

PS Wellington is way cooler though and you know it

ha ha nice.
I'm a bit conflicted.
Deep down a Wellingtonian (4th generation and all that), but more superficially a 'JAFA'.

I've been in Welly nearly 4 years now, you think it would wear off, but every morning I watch the sunrise over Wellington harbour (i'm always up at dawn) and fall in love with the city all over again. I've lived all over, I have travelled all over but Welly has my heart.

I think it's got more 'soul' than Auckland, that is for sure.
But I much prefer Auckland's size / population. Even then Auckland is pretty small.

Auckland's weather is far nicer too. I also think Auckland's hinterland is amazing, offering much more than Wellington's.

I'm moving away - too many pretentious people who think a play and some wine makes up for 80% rubbish weather.

Whatwillhappen..and this is why I am probably well suited to Wellington, I love the weather here.

Wow! The wind is infuriating, especially in summer near the beach.
Each to their own!

My old dad loved Wellington.

To be honest I've never even visited Wellington. There has never been a reason.

Lovely city. I’ve been there four times on business (from Auckland). Horribly cold and unbelievably windy on three occasions, then as humid as Hong Kong the fourth time. Must have been unlucky. When the motorway finally gets there, Whangarei will be the place to live. Superb location, no fault lines or volcanoes and a nice climate without extremes.

It's not hard to imagine, given better job security at the moment.
Also, compare Auckland central/city fringe areas like Remuera/Ponsonby with land values at $2500-$4000/m2, against comparable Wellington areas like Karori/Kelburn at $1600-$2500/m2. Auckland could drop 20% and still be higher priced than Wellington m2 prices. Auckland sections tend to be bigger too.

Just to clarify, i was just being facetious about the rivalry between Welly and Auckland. All of NZ is beautiful. I was just making a joke about the historical squabble between the two places.

I've been reading in the comments on this site that Christchurch is about to go up too. So the average decrease across the rest of the country must be like 30-40% when you factor that in....

TM2 will give you a big hug for that comment..

The Image / photo above in the article sums it up.

House on top of the cliff at the edge waiting to be touched to fall of the cliff.

House crash (more than 20%) percentage has increase from fall (Less than 20%).

22
up

I feel sorry for FHB's who jumped in at the wrong time and are about to be crushed... This is the point where mainstream media and the RE "industry" should be held accountable for their sins. I know it's never going to happen, but there should be some sort of punishment for pushing false information ("house prices are never going to fall") in order to lure more people into the Ponzi scheme.

If we put some of them in stocks in the local square, I know I'd come along with the limp lettuce and soggy tomatoes in my vege drawer.

There are several reddit common taters that would be freezing the tomatoes. There is plenty of real hatred out there for the property spruikers.

If we are going old fashioned then swinging from the end of the rope would be a more fitting punishment.

10
up

We heard that line during a meeting at the bank 12 months ago. "Don't worry if you bid 40k higher than you needed to, you'll make it back in capital gains within the year".

Whenever you hear something like that, just ask them if they can guarantee that claim. And enjoy the awkward silence that ensues. The G-word shuts them up real quick.

Eh, some of us needed stable homes and you can't put off things like families forever. It's been obvious for years that the gains people made on RE now was a way for the state to avoid paying livable super when the music stopped, so they've allowed it and we just happen to be collateral damage...again.

Our whole economy is based on credit expansion and population growth through immigration.

The OCR cut last year was to increase consumption by increasing house values and the wealth effect.

So now when the music stops what else have we got to fall back on, innovation... no, technology....no, automation and efficiency ... no, environmental gains ... nope

Neither Labour or National has any new ideas just the same old Ponzi scheme, which has been begging to crash as our GDP per capita keeps dropping. We were pretty much in a recession before this recession.

"Our whole economy is based on credit expansion and population growth through immigration."

Except that is not true. It certainly doesn't describe milk exports for example.

Our whole economy is based on credit expansion and population growth through immigration and milk exports.

Happy?

Happier, I always think accuracy is so important.

But it also doesn't explain the logging industry as another example. And the list goes on.

Simply put - the facts don't support that premise.

Right. There won't be a quick, painless way out of this mess while still being able to call ourselves a high-income, developed nation since we have exhausted all possible "get rich quick" schemes for the sake of GDP growth over the last few decades.

Don't get me started on the pension....

On the other hand, maybe they’re performing an unintentional service by teaching skepticism and the need to seek out alternate sources of information. I’ve been waiting to buy for 2 1/2 years but held out because my own research suggested that house prices had been increasing at an unsustainable rate, and that a correction was coming, one way or another.

Perhaps so, but there was always going to be crossfire in the form people who for various reasons (body clocks, etc) had to get on with things and couldn't wait longer for a great reset that ultimately took a decade to arrive after it should have.

You don't have to buy a house to have children.

Maybe you should tell that to my friends, some of whom have not spent more than 12 months in one place since Uni as various landlords have sold up from underneath them. I'm talking highly qualified white collar professionals.

Doing that with newborns or school aged children, more than once a year, with less than one full time income or paying full-time daycare costs? No thanks.

I'm a highly qualified white collar professional. I have a young child. I don't own a house, out of choice (or disgust at the current bloated prices which have been just asking for a pin).

Kids might be the reason you would want to burden yourself with an overpriced house but you need to have them first for that to be the case.

I also now understand the disregard a small child has for the good condition of a house. Glad it's not mine. Wait until they are a bit older before you think about having nice things.

Yes, benefit of hindsight, I guess. I suppose it's a case of making it work for us given the situation we're in now - hunker down and save money as if we're trying to get a deposit. I suppose there won't ever be a good time for this kind of thing.

Unfortunately you've just described the population segment that makes landlording so attractive..

As a woman I can state that the desire to have a safe appropriate space to raise a child has felt like a basic biological need to me personally. What GV states makes perfect sense to me. I would feel anxiety / insecurity knowing that the house we were living in could be sold out from underneath me, stuff that. Being a new mum is hard enough without adding more stresses.

Hello Jester. Hope you see that I don’t promote such tripe!

10
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If Auckland drop by 20% means Wellington sure to fall by 12-15% mostly high priced properties.
Countdown just started!!!!!!
Watch the game in 6 months time.

12
up

My tea leaves are telling me a double digit drop starting with a 3 but my fortune teller advises me to think in terms of one starting with a 4.

"New Restrictive Policy?"Coming here as well as the parent bank?

From 17 May Westpac will cease accepting loan applications from a swathe of potential borrowers, including small business owners and independent tradespeople who want to fund 80 per cent or more of a residential property purchase through credit. The new restrictive policy will also apply to all loan assessments for borrowers who generate income from a mix of independent business activity

https://www.bankingday.com/westpac-squeezes-out-tradies

How much of the workforce does that encompass? Probably not as much as 20 years ago, but still a sizeable amount surely.

Quite right. But Westpac appears to have 'started somewhere' with the crackdown on lending. It's just a matter of which other segments of the borrowing community it extends to.
A Credit Squeeze is upon us.

same thing happened in 2009, if you were leveraged they called it in

Expect more of this type of news.

Bunnings to close stores - jobs to go....

More people who won't be able to pay rent/mortgages.

So much for Tony Alexanders prediction about more DIY spending then!? I must admit I am really shocked by this one. The weekend before level 4 many places sold out of paint!!! So much DIY was done during the lockdown. How unsustainable must Bunnings business model have been if they are struggling already?

https://www.stuff.co.nz/business/121484712/bunnings-proposing-closure-of...

Interesting. It's more of a consolidation though really, than anything too profound.
I guess in the Waikato people will just need to drive a bit further ie. to Hamilton.

7 stores but only 145 employees? Must be some tiny bunnings I've never seen.

Could be redeploying some into other stores.

"How unsustainable must Bunnings business model have been"

This is a nonsense statement that could be levelled at ANY business closing for ANY reason at ANY time.

Among the unspoken assumptions is; that all businesses must have, at all times, enough cash to work with zero income for an unknown period of time on 48 hours notice and without the rules of such a situation being communicated beforehand.

P.S., if you get a virus it's obviously because your body is unsustainable, clearly your own fault.

they work off turnover, so i suspect these stores are smaller ones in smaller towns, its unlikely to be any big city ones

I don't get the analogy Ralph. We all account for the fact that illness can and does happen to our bodies, which is why we have a health care service, make savings, pay for income insurance, pay staff sickness and pay for health insurance. It's why we take steps to boost our immune system, why we eat kale and exercise. Why we fund research to understand the body and health issues. It's all part of preparing for and mitigating the weaknesses of the body.

Bunnings is not ANY business. They are not aviation, hospo or tourism.

I think we are about to discover that a great many businesses were flying close to the wind. We might be about to learn that the entire system was unsustainable. Indebted, speculative, over extended. We created an economy with some serious vulnerabilities, all the pandemic has done is expose that, but I think we all know that it had been unsustainable, for some time. There are businesses who don't overstretch themselves and expand to the point of vulnerability, there are businesses that build up cash buffers. A large experienced, business in a thriving industry, such a Bunnings I would not have expected to be in trouble so soon. They were open to tradies from level 3 and there were queues round the block at all DIY stories before lockdown, they were closed for 4 weeks and would have been able to access wage subsidies etc. They would also have spent plenty opening those stores and it will cost to close them too.

The premise rested on blaming the impact of all external events on your own lack of planning. Further, the premise allowed zero context, it does not matter that you were never warned, have no prior details of the disaster or the scale of it. Irrelevant (apparently).

So the link is; if you get sick, you should have planned for that. It's just another unknown, unplanned, external event nobody told you about. If the premise is true, then it's your own fault that you didn't build a stronger immune system. You were obviously 'flying close to the wind' with your health and should get no health care.

But of course, the premise is not true and the existence of a health system is proof we know it's not true and have planned for it not to be true.

I doubt they were able to pay either on Bunnings wages

15
up

So all governments needed to do to cool house prices, was reduce immigration.. Who would have thought.

Haha...ha. exactly.

I'd imagine successive governments have been given the regular Treasury projections of the super burden on the horizon with boomers leaving the work force and realising how expensive it is going to get. How do we fix that? Immigration and lots of it. Deal with the issues that creates further down the track (like now) and have a double whammy.

paul goldsmith would not answer that question last night when jack tame asked him if he would open the borders again if they got in power, it took three attempts to get an answer out of him then it was a hmm haaa answer, that is nationals growth policy there high immigration and house price rises to make those that own wealthy

Well. So they have no other policy to offer than high immigration and pushing house prices up?

And they were pretending the other day to be concerned about mortgaging our children and grandchildren's future? Sounds like a bit of fake concern, in that case, hiding every intent to go back to mortgaging the kids' future to enrich folk now.

: Popcorn :

If houses prices did fall 12% could that mean the the value of a new house is less than the build cost?

What do you think?

Surely old leaky, or poorly insulated houses be less than that new construction? Of course they should.

Of course, but a could a new house build cost be higher than the resale price it could be sold for once completed?

I doubt it. Why do you think new builds cost so much? If I was in the business of selling tulip bulbs, and then I found out that the guys I had been selling them to grew them into tulips and sold them for 3x or 4x, guess what - my price is going up 3x or 4x. I think you'll find that costs in the building process are inflated because everyone wants a piece of the pie.

"Why do you think new builds cost so much"

I don't, I'm asking. Some industries work on 15% gross margins, so 12% would leave only 3% profit. But I have no idea about housing industry costs or margins.

If build costs were to exceed resale values that might have a paralysing effect on the building industry.

Much of the overvalued price of houses is in the land.

Land prices are overvalued by approx. 50%, in that, once you take out monopolistic land banking, infrastructure, and consent costs, then the true development costs plus margin could be 50% less than present.

RBNZ rule up to now for securing house price growth:

House prices look to dip,
Lower interest rate.... all good
House prices look to dip,
Lower interest rate.... all good.
House prices look to dip,
Lower interest rate.... all good.
House prices look to dip,
Lower interest rate.... all good.
House prices look to dip,
Oops...Interest rate = zero
House prices look to dip,
Oops...Interest rate = zero
House prices look to drop 10%
Oops...Interest rate = zero
House prices look to drop 20%
Oops...Interest rate = zero
House prices look to drop 40%
Oops...Orr retires....Game over!!!

The immigration ponzi is over IMHO, with travel becoming pretty expensive and the hindrance of having to quarantine, probably at both ends, it will be nigh on impossible for people to afford to travel backwards and forwards to visit relatives, which will cause people to think twice about leaving them in the first place.

This short video is summing up the Housing market in NZ...
Tim, Yvil, and few others are in charge of the control office and our favourite TM2 is the one behind the microphone.
https://www.youtube.com/watch?v=VSdxqIBfEAw

LOL.

The level of money printing currently in progress is truly bizarre. Is this a 20% dropped in nominal values on top the NZ dollar being smoked by QE? Those financial geniuses can't understand why the stock market has recovered so well. The buyers of stocks and other assets don't want to hold fiat currencies that are hot of the press!

Printing a one-dollar US bill costs 5.4 cents while printing a $100 bill costs 15.4 cents.

Ah, what short memories.
Again the all-knowing keyboard warriors slagging off at bank estimates. Irrelevant that the banks have experience and expertise, have modelling tools (albeit not quite having experience of the unique specific current situation), considerable current data, information gained from numerous contacts, and most importantly a thing that will have significant influence on the market, the knowledge of their proposed lending criteria.
Yes, there is a high degree of uncertainty due to the extremely sudden onset of this change in the market and a lack of current data, but hey the keyboard warriors know best and for banks to acknowledge that there is some degree of uncertainty well - that just goes to show banks know jack sh*t.
Yes, all last year these all-knowing key board warriors slagged-off and rubbished Dominic Stephens/Westpac 7% increase in property prices. Only thing wrong was prior to the unknown Covid factor, house prices rose by 7% and Westpac were right.
But nah, nah, the keyboard warriors know best so listen up.
Me, if I was waiting and watching looking to purchase, I know what comments and expectations I would be noting.

Again the all-knowing keyboard warriors slagging off at bank estimates. Irrelevant that the banks have experience and expertise, have modelling tools (albeit not quite having experience of the unique specific current situation), considerable current data, information gained from numerous contacts, and most importantly a thing that will have significant influence on the market, the knowledge of their proposed lending criteria.

That they do. Regardless, banks worldwide have a habit of understating forecasts for the obvious reason that their business relies on asset price appreciation, particularly in NZ and Australia. And to make a claim of "house prices will fall 12%" in a media press release without disclosing methodology or precise scenario parameters should be treated accordingly by the reader. Having worked with banks on consumer insights data, I can tell you that their leading people are not that skilled or clever with how they measure their own customer's behavior. And if you cannot quantify customer behavior, how accurate do you think house price forecasts are going to be? In my experience, bank leaders pay more attention to NPS scores if it is weighted towards their bonuses.

JC
Yes, economic forecasting is not an exact science. It is simply factoring in the knowns and being guided by that.
Does one slavishly follow banks estimates - anyone who wants to make a sound investment, listens to comments, appraises these and other information and factors and makes a decision on that.
Personally, in terms of listening I wouldn’t be putting any weight on the unsubstantiated claims and slagging thrown about by some here.

Yes, economic forecasting is not an exact science

Right so best focus on communications strategy. It's far better to "expect a fall of 12%", rather than "could fall up to 20% or 50%" if you don't want to frighten the flock or upset your core business.

Think I had a heated comment thread with someone here about a week ago - can't remember if it was P8 or Houseworks (or another property bull) about statistics.

I'd said I thought housing could fall 30-60% and for whatever reason they got completely fixated with the 60% but no other data point - i.e. the most extreme point of the range provided - you're down in the less than 1% probability if you look at the range over a distribution of possible outcomes.

Like above...best to just follow the 12% but then you start to question all of the variables, each with standard deviations of possible outcomes, to then conclude with a fixed number. How do we know we won't have a big earthquake in Wellington this year or the South Island...how do we know that we won't get into a nasty deflationary cycle this year....how do we know that we won't have 30% unemployment or a fall of incomes of 30% across households this year.....how would that 12% look then?

I'd said I thought housing could fall 30-60% and for whatever reason they got completely fixated with the 60% but no other data point - i.e. the most extreme point of the range provided - you're down in the less than 1% probability if you look at the range over a distribution of possible outcomes.

System 1 thinking (fast, instinctive, and emotional). It's prevalent with things such as house prices as it taps into hopes, desires, fears, and concerns. I completely understand why this happens when they see 60%.

Yes read Thinking Fast and Slow by Kahneman a while back (system 1 and 2 thinking, biases, loss aversion etc).

People shouldn't get me wrong - if we see a house price correction (30% or more), then markets open up again, tourism comes back again. I'll be bullish towards housing. Just at the moment, its like 1929 in the housing market.

IO
All of those scenarios are possible just like Covid has been.
However, we can’t be transfixed in a state of fear. Like crossing the road there is always the chance of being hit by the red bus, but we are prudent and cross the road.
Decision making - economic or otherwise - is about listening to advice from those who have some knowledge, considering all the factors Including risk factors, being prudent and making a judgement on that basis.
Simply slagging off and making baseless guesses which are often made on this site need to called out for what they are.
I recall both FB and you calling 50% falls in property prices without substantive reason. I call that out as a wild baseless guess as there was no basis, many are concerned about their personal situation and it was nothing but scaremongering.
I haven’t made a call as I have uncertainty about the significance of a number of factors.
However, I see consistency with two banks and an independent economist who I respect making calls around the 10, 12, and possibly up to 15%.
Those who simply slag-off the banks view (make their egos feel good) and then make a unsubstantial claim of 20 to 30% need to be called out.

IO
Today:
"by Kezza R | 12th May 20, 12:18pmup
I'm guessing 30% to 50%."

So IO, are you going to defend that as a substantiated comment of worth?
I am too old to worry about being popular, but an unsubstantiated comment like that gets 15 up ticks!!!!! Come on.

If you understand the macroeconomic factors and behavioural finance concepts behind that outcome then yes its is a substantiated comment of worth.

I'm certainly bearish on property and have been for a while. But if things change over time (pricing and macro influences), I'll buy and I'll be bullish, but its like 1929 in the property market at the moment (it could even be worse).

I can only laugh P8..I'm sorry. All the best.

Did you work for a bank or something P8? Trying to get my head around your utter faith in what they have to say (remember they're sales people, just like any other company...the need to keep selling their mortgage product).

IO
No, if you care to follow my comments I do not have utter faith in any one call - whether it be a bank or other commentator. However I never read Ashley Church / One Roof due to seeming bias.

I chuckle that you question the credibility of the banks' estimates, but as you say you have been calling a bubble burst for five years. Will be interesting to see if even an unforeseeable 1 in 100 year event in this time frame proves you correct.
However, rather than the banks, "me thinks its your credibility at risk here".

Ok good stuff P8

IO
Cheers mate. Nothing like a little debate - it sharpens up one thinking and decision making.
Keep safe.

Or attempts to beat you to the ground with stupidity and I don't know which one of us that is yet - time will tell!

Don't bother with the maths illiterates mate it's a lost cause

In the past when fixing my mortgage rate, I have done the opposite to what these bank geniuses suggest. They are herders of the masses and will steer you to take a rate that benefits their employer. They are experts on economic theory and I got sick of them saying rates won't be going any lower. Sitting in my armchair, I wondered with so much debt in the world how that would be possible. These banks experts are talking as if the system is sound and working as per their theoretical assumptions. The banks risk being made redundant under negative interest rates. Logically we only need one bank controlled by the money printers giving out these loans. The latest herding - 2.99% for 2 years. Sitting in my armchair I wonder how much lower are these rates going and if being locked at 2.99% next year might look expensive.
Negative interest rates - ready, steady, go!

https://www.rbnz.govt.nz/-/media/reservebank/files/monetary%20policy/ump...

10
up

But Mike Hosking and Ashley Church of OneRoof says there wont be much of an impact on house prices!

12
up

im Sooo sick of the garbage OneRoof has been pushing lately its out of control

One of the agent newsletters I get is normally quite balanced (IMO) but has recently taken a rather desperate turn. Can't be too surprised that those who were always imbalanced have become even moreso.

Don't worry Alan Jones resigned today. 2GB Sydney will be on the prowl for some ultra-right shock jock.. Mike might be qualified for that.

National retailer Bunnings is proposing to close stores in Ashburton, Hornby, Hastings, Cambridge, Rangiora, Te Awamutu and Putaruru with 145 staff affected.
this does surprise me that they would close both Cambridge and te awamutu.
i had family that lived 1/2 between those two cities so back in the day if you wanted maccas you went one way if you wanted KFC you went to the other, its only a 10-15 minute drive down the motorway between the two cities.
i guess with the new motorway from Cambridge to Hamilton its just as quick now

13
up

If BNZ are announcing a 12% general price decline then their mortgage lending guys will be conservative and reduce home valuations by around 20%.

This isn't just BNZ, its every bank so what this means is pretty much every FHB who bought with under 20% down payment is now borderline negative equity. And this is just the start.

Starts with a price signal. Pied piper.

Auckland rental listings on TradeMe are now nearly 4900.
Interesting, CBD properties seem to have plateaued / slightly fallen.
More suburban places are starting to get listed, and seem to be slow to shift.

Was it about 3000 when you started checking a month ago Fritz? If you don't mind indulging my laziness in not needing to go back and find your older comments

Can't really recall, I think maybe it was about 4000?

Funny thing is TradeMe removed listings count from page since yesterday.

"Tick" the box to enable the map view. That will reveal the count.

Thanks Welly-FHB :)

How about a poll of our collective genius David?

Give us 10% increments from + 20% to -60%, a time frame (1 year?) and vote.

The most popular estimate is the official interest.co.nz readers "forecast" and we come back in a year to see if our herd intelligence was any good.

I guess that means they would not be giving mortgages over 88% LVR? Let's wait and see but we are all just picking arbitrary numbers, nobody really knows what will happen no matter how much they pretend to have a crystal ball. I could say 50% right now and be as close to the real number as the 12% from BNZ, just picking a number...

I dont agree with this forecast of a 12% drop certainly not in Auckland anyway. Interest rates are low, a lot of money is swilling around the economy with the government spending big time, and the demand for houses in Auckland is greater than supply. I just cant see it dropping, but if it does it will be short term. The money zapping around the economy will settle on property at some stage.

I've yet to meet a NZer with money. Borrowing from your property doesn't count.

So if you have many millions of equity in property, It means you don’t have money?
So that if you are on welfare and no job, you have money if you have $20 in your wallet?
I know which one I prefer!

As a recent FHB, unfortunately we may have had the worst market timing ever, bought in Jan and settled during lockdown. We do have a large mortgage (in my opinion) but it is only 2.7x our salaries in very safe jobs and we paid a 20% deposit with $40k cash spare just in case something happens. We have our repayments set to pay it off over 15 years as I’m not that comfortable with the mortgage size. We didn’t buy it as an investment, it’s a family home for us. I guess my question is, I don’t really know if I should be worried or not? Obviously a value drop will suck but we are repaying it back quickly to build our equity as quick as we can.

You will be fine. I'm guessing a mortgage of around 500K. Interest repayments will be less than rent anyway. The low interest rates will ensure prices don't drop too much and it sounds like you are planning long term. Rest assured that a lot of people are working behind the scenes to ensure that people like you will be okay.

Try again sorry?
Over supply = price falls
Lack of buyer confidence means more inventory and fewer sales
Unemployment doubles
Little immigration for 6 months
Etc

Sounds to me like you will be ok too. 15 year mortgage term sounds like you had your head screwed on right from the start and didn't buy into all the hype that's been thrown around for the last 15 years. You'll be grateful for your pragmatic decisions / prudence in purchasing in about a year's time I reckon.

Mostly spot on reasoning
However? 12% by when?
By Xmas in my view and more after

For succinct summary of my view on prices and sales in Auckland please see my column on LinkedIn recently

no one should listen to economists they are seldom right and are doom merchants at best.
Our market cannot be compared to anywhere else as it is quite different.
I am predicting a boom in residential construction started by the government.
I am also predicting Labour led coalition voted in September as anyone who thinks the nats,are worth backing don't get they will let the borders open and covid back in
I am predicting unemployment to drop after a short rise. I am predicting that lots of people will learn to grow food and,bake bread ...

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