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Economists see the housing changes announced by the Government as having a chilling effect on investor demand and acting as a significant drag on house price growth

Economists see the housing changes announced by the Government as having a chilling effect on investor demand and acting as a significant drag on house price growth

The housing changes announced by the Government are set to dampen investor demand and considerably take the steam out of the housing market, economists say.

And economists at the country's largest mortgage lender ANZ say there's now an increased chance that house prices might actually fall.

ANZ chief economist Sharon Zollner and senior economist Miles Workman say they expect the announcements from the Government to have a "meaningful impact on investor housing demand" and make a decent start on the complex question of improving house supply.

"The moderation in house prices we were already expecting is likely to be sharper, and the odds of house prices falling have risen," they say.

Investors no longer being able to deduct interest costs is the "most significant policy change" from a housing momentum perspective as it should help take the wind out of the sails of the housing market, they say.

"That’s something that we were already expecting to happen in the second half of this year on the back of affordability and credit constraints, and tighter LVR settings, but today’s announcements increase the risk that the house price moderation is sharper. But importantly, it increases the risk that house prices actually fall – it’s very difficult for policy makers to engineer a soft landing."

Westpac senior economist Satish Ranchhod says Westpac economists have frequently highlighted that financial factors play a dominant role in determining house prices, "and investors account for a large share of the housing market".

'A chilling effect on investor demand'

"Today’s announcements – particularly the changes to interest rate deductibility – will significantly reduce the financial incentives to invest in housing. That will have a chilling effect on investor demand," Ranchhod says.

"Before today, we were already expecting house price growth to slow through the back half of this year as we forecast mortgage rate rises. Today’s developments indicate material downside risk to that forecast." 

ANZ's Zollner and Workman say "it’s very hard to know" how investors will respond.

"The impacts might be quite slow burn, as the lengthy implementation period adds uncertainty around the shelf life of these policy changes, and the tax impact is smaller because mortgage rates are currently so low. Some may be able to recoup the higher cost by lifting rents. Some may no longer see housing as a viable or desirable investment and will look to sell. Others (without debt) will be relatively unaffected.

"In reality there will be a mix of reactions, which make it very difficult to gauge the magnitude of the response in aggregate. But we know this is a negative. Stepping back, there is a lot on the policy front that’s coming to a head as affordability and credit constraints lift and supply continues to gradually ramp up.

"House price falls are hardly unthinkable from such a stratospheric starting point," they say.

Westpac's Ranchhod says that as the Government's announcements are "likely to be a significant drag on house price growth", the Westpac economists are expecting this to "reverberate" through economic activity more generally.

"The housing market plays a key role in shaping economic conditions more generally," he says.

Interest rate hikes 'off the table'

"In particular, growth in house prices tends to be associated with increases in household spending and residential construction. We’ll review our economic forecasts in light of these changes over the next few days.

"In terms of the RBNZ [Reserve Bank], today’s announcements mean that [Official Cash Rate] hikes are clearly off the table for the foreseeable future. With a likely slowdown in house prices, the economy’s recovery is likely to be even more gradual. That will make it even harder to generate a sustained lift in inflation," Ranchhod says.

Also commenting on the broader economic perspective of the Government announcements, ANZ's Zollner and Workman say slowing housing-induced momentum shouldn’t be too concerning so long as the pipeline of planned activity is not materially dented and a pivot towards a trans-Tasman bubble (and later, generally open borders) see the key driver of underlying momentum pivot from housing to international tourism and services. And they note that rising export prices are also providing a boost.

"But the economy is still pretty vulnerable this year, and the state of the housing market does have a big impact on the New Zealand economy.

"The counterargument to that is that if house prices were allowed to rise unchecked still further from here, the vulnerability of the economy would worsen, not improve, as the risks of a boom-bust cycle rose. The big negative externality is the possible impact on renters–the very people the Government is trying to help into the housing market. But ultimately, rents inflation can’t exceed income growth for long."

Zollner and Workman say there will also be implications for monetary policy.

Increased potency of higher interest rates

"The Reserve Bank will certainly add a sharp housing slowdown to its 'negative risks' basket, and likely revise down its house price forecasts. This will add caution around OCR hikes via less-than-otherwise housing-induced domestic momentum. But perhaps more importantly, the policy change will increase the sensitivity of landlords to higher interest rates, thereby increasing the potency of higher interest rates." 

Kiwibank chief economist Jarrod Kerr, senior economist Jeremy Couchman and economist Mary Jo Vergara say the announced $3.8 billion Housing Acceleration Fund "is a superb idea". Unfortunately, they say, it’s a superb idea that’s already under-resourced.

"The size of the fund is tiny, and hard to take seriously. We know it will grow; it must. But we should have seen a more respectable figure the fund could grow into, rather than a 3.8 figure the fund will grow out of in five minutes. 

"...$3.8 billion is merely a drop in a leaky bucket, and is unlikely to have a meaningful impact on infrastructure investment or housing supply. But it is a positive step in the right direction. It is important to grow the fund, so the funds can truly accelerate councils. The greatest challenge developers face is finding viable land to develop, and getting council consent to develop.'Accelerating' the consent process is what’s needed, they say. 

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114 Comments

25
up

Come on, give that OCR a nudge upwards with a follow through effect to term deposit rates. A lot of retired folk are struggling. Imagine an OCR of 3.5%, with mortgage rates closer to 5%....interest no longer tax deductible....could be heaven sent for a cash buy of rental property. Waiting, waiting, waiting.

Give owner occupiers the ZIRP soft-landing and then stick an extra 2% or 4%. Let's do this once and do it right.

One problem with OCR 3.5% is that it will further strengthen kiwi dollar and weakens our export position.

Guess they will have to try to suppress inflation rate if they want to keep interest low. Can they? There are already lots of talks about rising rental price. If rent price increases, surely it will effect inflation, right?

Yes but's only a part of the CPI calculations

Rent isn;t the only item that makes up the CPI. I would have thought the more money people spend on rent the rest they are able to spend o other goods.

Cheer up buttercup. People will pay what they have to for our food.

It just means those producing that food get less $$$.

It's ok the RSE slaves will be back so costs will be down too

why dont we sell to all those starving people in Africa?...oh thats right, they cant afford to pay the cost of production.....damn.

Maybe cost of production is the problem. If only the Chinese could grow Kiwifruit hmmmmm

10
up

Jay..if the OCR was 3.5% this year the kiwi dollar and exports would be the least of our worries. Our whole financial system may crumble under mortgage rates of 5%+.

Indeed!

All banks stress-test mortgage applications so that the mortgagees can sustain up to 7% interest rate. Therefore mortgage rates of 5% is perfectly doable.

fortunr...the money it would remove from the merry go round would destroy the economy.

It doesn't remove any money. Just puts it in different hands. Savers instead of speculators.

21
up

I find it annoying how a banker like Zollner who is partially responsible for the run up in house prices, and has made a fortune doing it, now tries to help 'fix the problem'.

Yep. It's all part of the propaganda show run by the banks. The banks have been making out like bandits while being able to lend money into existence while knowing full well that the taxpayer has their back should SHTF and debasing the wages and incomes particularly of young people. Such a rort.

And how's this nonsense: ANZ's Zollner and Workman say "it’s very hard to know" how investors will respond. Well why don't you put some of your resources into research? You can model different scenarios using a different range of research techniques.

Banks are like a box factory. Just one job: make boxes. Banks have one job: lend out money, mainly on residential property.
For flippers, banks just offer a kind of bridging finance as far as I see it. They give you a heap of money to enable a purchase, but soon enough the property is flicked on and a hefty profit banked by the flipper. The whole deal with the bank of a mortgage to be paid off over so many years is totally disingenuous, never any intention other than to flip.

13
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Tom..they are only banks in name. In reality they are greedy, foreign owned building societies with too much influence over our country.

Yes it's farcical.

Yes it's farcical.

davo..agree although Zollner certainly will not be making a fortune. These economists are academics and although they are paid more than they are worth you may be surprised at how low their salaries are. As I understand some of the younger ones you see in the media regularly can't even afford to buy their own home.

I thought they were late 100s/ early 200s?

For a house in Auckland that still only puts them into the 6:1 price to realised income bracket - still unaffordable!

Fritz...I thought it was about 120K, the highest paid getting about 160K but I don't really know TBH.

12
up

Almost 30% of purchasers in the market are investors and 40% of them are on interest only loans. These new policies combined with higher LVR's and other possible changes by RBNZ on IO loans and debt to income are going to be a game changer for the market. Ad to that - Global interest rates are rising, the Global economy is still full of risk, migration is still low and there is a solid amount of supply coming on. It's going to be interesting to see how this all plays out. Possible correction ahead? I think so.

Wait until your mum and pas have to go onto p&i payments.... watch this space

Possible correction ahead? I think so.

Probably about 10 years too late, but better late than never. Also, I'll believe it when I see it. Whatever the case "buy the rumour, sell the news" definitely applies in this scenario.

Finally I'm with you mate ; )

Adam B NZ - You may well be right about a correct, if it is a significant correct the supply side will stop in it's tracks.
Hopefully a stabilization can occur as new builds will be uneconomic in a falling market adding to more trouble on the supply side.

16
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Great policy from Labor today.. the infrastructure half could even end up being self-funding/profitable.

I believe these policies will have a positive flow-on-effect for the velocity-of-money and employment. I dislike a Pinko as much as the next guy, yet this is REALLY, REALLY Good Work from Labour. Surprisingly well thought out.

They should be VERY proud of themselves - a great start.

15
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It's so refreshing to read a positive statement, its been like a year or so...

indeed, they had to do something right eventually lol :)

Even a stopped clock is right twice a day huh?

Righto, Jaci...Zack.

The lack of syllables in my name makes it hard, doesn't it. :) Take a leaf out of Labour's book and try harder.. you'll get there lol.

Just jokes dude, you're all goodz :)

I would say you have a plethora of syllables - quite jealous.

If the housing crisis is defined by overpriced rents due to an imbalance of supply and demand, and a lack of affordable housing, again due to supply and demand imbalance and high land costs, how do you think today's policy announcements address these issues?
Ill agree in the short term fhb will be better off as demand will reduce from absence of investors, but in the short term rents will increase, and longer term this will only reduce supply if only OOs and FHBs are building.

Removed due to repeat

Elsewhere I said I give them a B. The demand side stuff is good, as is the Homestart. What's missing for me is shared equity, until they pump this up they are only addressing the needs of middle and upper middle income households, not low- middle income.
But it's more today than I was expecting. So half a bouquet to the government.

An 80% drop is not unimaginable. Ask the other B Movie economies: the Irish, the Spanish, the Icelanders, Russia and Eastern Europe, Hong Kong, etc.

Somebloke...can't see 80% but I can see 35 or 40% and recovery taking a decade or more as a worst case (or maybe best case) scenario.

10
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80% drop? Why don't you just round that to 100%. Either way you're dreaming.

Ok. In both Ireland and Spain there was a problem of ghost estates full of unsold houses, many were eventually demolished (although if you'd listened to some beforehand, there wss a housing shortage. A bulldozed pile of bricks would have to be close to a 100% loss. I also remember seeing the skeletal remains of unfinished tower blocks littering downtown Dallas in the early 90s nearly 10 years after the Texas crash.. no one remembers it now. My point is losses after property bubbles can be massive amd crushing. People like Andrew King, Ashley Church and Matthew Gilligan have spent a whole career having never experienced anything like it, but it happens, and its almost impossible to see a bubble from the inside...you just see rainbows.

11
up

I've just asked the countries you mention, none of them know of an 80% drop but hey go all out' why not 247% ?

Yvil...I agree, 80% seems far fetched but as I have said before I think IF property goes down 10% we are likely to see it continue to 30%+. A pure guess but made with sound knowledge and an excellent grasp of probability and risk analysis. Time will tell.

A 20-30% drop over the next 2-3 years is quite possible. Still might not happen, of course.

Fritz...almost anything could happen in the next 5 years from a 150% increase to a 50% drop. How is that for specific.
And in case anyone is wondering how that pearl of wisdom can possibly help them I will elaborate. What you can take from that is that no matter how sure anyone is that they know what the future of the NZ property market will look like your projections could easily be way wrong and therefore there is need for diversification (as always). It is amazing how many kiwis have millions of equity in housing but do not even think they need at least half their wealth in other areas such as TDs, stock and bonds. Whether they realize it or not they are rolling the dice.

Well put, although 150% over 5 years is a stretch :)
I have been calling a 'crash' in 2022 for a couple of years now. Time will tell.

Yes a drop of 20-30% is possible (I'm not saying it's likely), this will bring house prices back to just before Covid levels

Landserfs already bailing? I note within hours of the announcement a property auction in my neighbourhood was brought *forward* to 'tonight' (Tuesday). Desperation much? Ive heard of postponed auctions but Ive never seen this..and I'm old.

Actually Ireland bounced back stronger when their housing boom/bust had finished, their big mistake had been trying to save banks instead of allowing them to be restructured and deploying their money towards social welfare and job creation.

However, unlike New Zealand, Ireland actually allowed new houses to be built which helped pop the bubble faster. In New Zealand the onerous nature of land zoning laws, and decades of government intransigence towards changing those laws, has made this a much larger issue proportionally.

climbed back but over a decade later theyre still below where they were pre crash.

https://tradingeconomics.com/ireland/housing-index

Incomes I mean, I don't think high house prices are a good measure of success.

National were still blaming the RMA after close to 9 years in government, did no one tell them they were allowed to actually change laws while they were in government, if that's not an example of how useless they were nothing is.

One word: Coalition. Not defending National, but National needed ACT, Maori Party and United Future at various points to get things across the line. They were never actually able to implement the exact changes they wanted because they couldn't get enough people to agree. It could be that the changes didn't go far enough to get people to agree, while others went too far and failed there too.

Act were reasonably similar in outlook, the Maori party only had one seat I think so weren't really a roadblock to them.
But I thought they pretty much always had the numbers anyway by a clear majority even without their coalition partners.
I think it was more about being too scared to upset anyone, so they spent 9 years doing nothing.

None of those places experienced an 80% drop in price. What are you smokin' my man? I want some of that stuff!

Btw, all those places are more expensive than ever now. Mainly because free money is being printed everywhere. So much liquidity that there is nowhere to put the piles of printed cash in!

AC will be apoplectic with rage today.

11
up

Old m8 can just give up the flat whites and avos on toast if finds himself short of cash, can't see the problem tbh.

Tom.. At this very moment he will be hunched over his key board typing up some far-fetched spin of biblical proportions.

Unintended consequences!!!!

Haha the Church has spoken from the pulpit:

https://www.oneroof.co.nz/news/39158

What a load of bollocks.

Why invest in houses,Motels look the investment to be in.

Shhh, keep it to yourself

Yep, just like residential landlords, motel owners have become the new government parasites.

It's slumlords thank you very much.

How is it their fault? The Government is giving them 3x the nightly charge, why? They are literally pissing your taxpayer money away!

dp

Why even quote these bank economists? They like to think they can see into the future but in reality make fortune tellers and weathermen seem reliable

Yeah!
I guess a financial website is duty bound to quote them.
Thry provide comedy value, at least.

Also, that interest deductibility is going to massively reduce the mortgages investors take in the future now that they feel the full force of the consequences of that borrowing. This is going to hit the banks hard. Their economists shouldn't be the ones informing the public, their bread is buttered by the banks.

This headline falls into "no sh*t sherlock" territory.

The marginal buyer is set to completely disappear from the market and prices should fall back roughly to levels of a year ago before any other fundamentals have changed.

This is being phased in pro rata over 4 years by which time they will be voted out and National will return the status quo.

ld..why should investors be able to claim interest payments on a mortgage when home owners cannot?

Same reason business doesnt pay tax on interest paid to bank as an expense, its NOT income. Home owners dont pay tax on interest either they pay the interest exactly the same as the investor.

With current policies, if we both own a house, it is more tax efficient for me to rent mine to you and you to rent yours to me than it is for us to both live in our own houses. The policy clearly benefits owning investment properties over owner-occupying. This change is a great leveler.

https://www.nzherald.co.nz/business/chilling-effect-on-investor-demand-h...

This reaction from RE lobbyist is in extreme only to get the the shit out of government and dettering them to take further action on speculators like interest only loan.

Their credibility should be judged, if housing prices do not fall as they are shouting / fear mongering - reflecting that they are just a jerks on payroll from......

My feeling, as an investor, is that new taxes can be passed through in rental increases because the market is so tight for rentals. These measures would probably have been far more effective if they'd implemented the supply side reform first (e.g. opening up land for development via scrapping the RMA) because investors would have just had to swallow any new taxes.

Edit to add: I'm just trying to fairly answer the question the economist has posed here about how investors might react.

Yes most investors, I am not one, have already calculated the tax offset loss means they will raise the rents 100-200 a week and a high tide floats all boats so you watch everyone do it as soon as they can

And you don't think tenants will react to that? Ie. Move in with friends/family

Not everyone can do that or would want to do that and even if they do it would be temporary.
It might mean a few more FHBs find it easier to buy but It’s very obvious to me that rents will also increase and more people will go onto government housing.

Yes it could place upward pressure on rents, but perhaps not as much as you think.

The nature of the housing market is such that supply/demand is extremely inelastic, particularly amplified when interest rates are low. There isn't sufficient supply for the rental market to be remotely competitive.

What's happened in the property and rental market has been inevitable. Supply side reform has been delayed by successive governments. For years we've sat around day dreaming about livable cities, high density housing, moderate house pricing etc. but not faced the basic fact that we've had a long term, sustained deficit in building residential dwellings. All the day dreaming in the world will not change that.

What we need now is dirty cheap land to be rezoned for a residential market reset. As soon as that happens I will sell up and get out because the game will be over within a couple of years, house prices and rents could easily half...perhaps more depending on prevailing economic conditions at the time.

Regards 'moving in with friends or family'......I say..or motels, and so the taxpayer pays $3000 a week per motel unit as homelessness spirals as rents rise because of this policy..just one possible effect of this policy?

That is why the Govt just has to freeze rents for at least 5 years. If they do not it will be another decision that hurts the poor more than anyone else. Surely they understand and it will be the next big announcement together with no interest only loans.

Probably right but that’s just getting next level. Surely having a market that regulated will cause all sorts of problems.

Yes who needs regulating when you can create a nations money supply as a private business.

Ok I've worked it out, finally. You just married Kate. Kate Seastrand.

I suppose if you were a communist govt. you could institute a rent freeze. But to increase landlord costs immediately when they have no way out in the short term, through nothing but govt. policy and then put on a rent freeze...surely you jest...or don't understand, nor care, about the laws of economics and a what policy like this will do to undermine international trust in NZ as an investment country. With this lack of confidence in the NZ govt. providing a stable investment environment I can see the NZD being around USD50c by the end of the year. Good for exports! The Govt. absolutely created this problem with their low OCR and now they are trying to address the problems they caused, but the actual root of the problem ( low OCR) stumbles along.

Calculate away....and how many tenants do you think are capable of shelling out another 1-200 a week in rent?.....get ready to be paid arrears @$5 a week for eternity.

He'll have to join the queue for a tenancy tribunal hearing timeslot if the whole market reacts by increasing rents by $100 - $200.

Doesn't work like that buddy.

If it were possible for landlords to raise rents by 100-200 a week across the board they would have already done so! They are, in general, already trying to maximise profits.

Some landlords will succeed in raising rent, but overall across the entire market it will not be enough to offset the missing deductions. That's why property values will drop.

It’s obvious rental yields will rise. I predict this is a combination of lower house prices and increase in rents. Landlords will not be able to pass this fully on, if they think they can they are dreaming. Winners are fhb and those looking to buy, losers are lifetime renters and landlords, owner occupiers largely unaffected except for small decrease in house price which doesn’t really effect them anyway. Overall good change, now government needs to step up to ensure a good pipeline of new builds through their existing Schemes so that rents do.l not increase too much. Rents are based on supply and demand not what landlords wish they could charge.

The collective landlord reaction shows what a petty and spiteful bunch they are. All gleefully talking (like Hosking) about how much they are going to jack up rents by. Based on this, they deserve to lose their shirts.

House prices will continue to climb rapidly. Banks creating credit is the key and the govt can't stop it unless they take that power away. House prices will go up 40 percent between now and September.

Nice one

The tittle is misleading, it gave impression that the housing cost increases is caused by investor.
The truth? investor is jus like Alcohol retailer, the 2013 LVR brake them a bit, so why RBNZ remove it for about a year? - C'mon tell me what happen when you let loose any drinking age rule just for about a year.. see the effect.
And put OCR dumbly into lower gear.. the truth? to deter investor? within 3-6months RBNZ can put the OCR lever to say a sudden 5-6% this will cause the OZ banks to be more prudent, but yea.. it's all about the base report, thus move it slowly as per market report.. rather than spook the irrational market hype. A short burst of loud teacher amidst uncontrollable loud class room.

Is the tax free lolly scramble is finally coming to an end. Yesterdays changes and in near future RBNZ elimination if interest only and introduction of DTi then of course price will de line.

Speculators your greed has done this to yourselves.

The speculators in the housing bubble market will take a knee maybe, some will cash out and some will become long term investors.
What effect that has on price is up to the market? Whether new buyers enter the game remains to be seen. Remember, covid to has played a part in incomes and has reduced the average earnings for people as well as job security. Banks aren't lending to those that fall into this category.

A change in sentiment would have turned the market around and start the lowering of prices. Covid was supposed to be that, but the lifting of LVRs and the lower interest rates gave us the exact opposite. The government basically forced that sentiment now, making it very hard for speculators to use housing as a profitable investment. With a smaller buyer pool, the investors wanting to exit would need to lower their price to meet the market. Lucky are the FHB with stable jobs.

Wow, Labour were serious about pricking this housing bubble. Thing is, they may get what they wish for. 10yr bright line tax, gets rid of the house flippers, interest not deductible - that's the biggie- this will see heaps of listing hit the market as highly levered investors head for the door. Added to this lot, the US 10yr rate (the most important rate in setting global interest rates) is rising relentlessly. . . . . is it just me who can see the perfect storm on the horizon?

"Economists see the housing changes announced by the Government as having a chilling effect on investor demand and acting as a significant drag on house price growth"

Drag on housing prices, do they mean will rise in single digit instead of double digit multiple time as happening since last year.

This should have been acceptable IF house prices have were not jumping in double digit on a monthly basis and not after fast 30% to 50% plus jump in just few months.

To make a difference to FHB , house price which has jumped from 100 to 140 and now should fall to 120 or to 130 which will be a win win situation for all even FHB and also earlier home owners, who will still have a gain if 20% to 30% plus except speculators who bought to flip. Also this is the only way to remove FOMO , which till it exist will keep the ponzi alive.

This way just like the promise on CGT yet targeting, Jacinda can say that prices are still more for home owners to affect their equity compare to previously.

Suggestion to contain the ponzi, follow up with restriction on Interest Only Loan, though may not help much but is the best bet in given situation and no harm in trying.

The fall of the prices of housing will be determined by how the supply side of the equation meets the market? My guess is, bugga all?
The speculators who've speculated and are on interest-only and had no other plan other than to make a fast buck will probably cough up, but the long term investor(s) will hold.

Not much will really change except for the moaning from all quarters.

Highly leveraged investors who will now have a large amount of additional interest to pay may not be able to hold on. But that is almost beside the point. This has significantly changes the sums for buying a rental property. Returns on equity have been reduced by 20% (assuming 60% mortgage for new investment property). Any reasonable investor would then be looking to pay 20% less for the same house, however this is complicated by the fact that it not impact on owner occupiers.

Think how much council rates are now and increasing into eternity same with insurance do landlords actually make any money or do they make it when they flip it just another ponzi scam I reckon

Regarding the vilification of mum and dad landlords... We evicted the multi-generation Polynesian family that had rented a large comfortable sunny house in a nice neighbourhood with convenient good schools for a very fair rent from us (has always cost us money to top up the mortgage, insurance, rates and maintenance of large section and swimming pool) for the past 5 years and sold it to a young professional couple with wealthy parents and no children.
We had wanted to keep the house in the family but could see the writing on the wall regarding the squeeze on landlords, as further evidenced by yesterday's announcements.
Everybody happy now?

Life is about balance, the balance which already distorted heavily now towards.. 'life in NZ planet is about housing'.
Some choose to have almost hundred houses here in NZ just to be a landlords no need to do those higher learning, study & work.. if NOT attractive, no one becoming a landlord right?
C'mon the squeeze in every facet of society, were happening the past 20-30yrs - hardly any to landlords, yep.. yep yep.. sure the 'healthy home legislation' but the cost will always be pass on to..

I have no idea why economists think house prices will fall. Certainly they won't in the short-term. Just too many people fighting to buy the same houses. Mid-term maybe as the supply fixes being proposed create a glut of over-priced new builds, but in the long-term they will keep rising as they always have.

sibrit...stay off the drugs mate.

I agree the odds are still stacked against any falls. Of course falls are possible but this is after the whole economy tanks so most people will be no better off with cheaper houses if their job goes out the window. House prices are tied to the cost of a new build so unless all the costs associated with this also fall your not going to see any significant change.

Compare to OZ, the issue is not about sky falling. But it's about 'affordability' average of about 450-550k - The very much standard correct calculation in NZ in term of land cost, new build, rates & insurance these can only be found in limited area but 'definitely not' in major area of economic such as Wellington or Auckland.
What happened in NZ is a price distortion, C'mon just because of C19 economic contraction, let loose the LVR & QEs? sudden massive of 20% increases makes sense? and be honest to admit how many of those massive/sudden increase towards FHB and how many towards investors.
Border closure, high flyer airlines crew lost jobs, tourism stop, despite that all housing increases? - will it be increase by 20% still? if LVR being lowered to 10-15% instead of full abolishment? will it be 20% increase too, if the QE magnitude just 60billions? (with 3-6 months incremental or decide not to continue the QE) - the fact is stand still, NZ have use big cannon in short time.. to shoot unknown insect. 'Out perform any other OECDs on the planet' in term of the knee jerk reaction. When building new house is actually can be cheaper than buying the existing one, that is a major distortion. Imagine? if you wish to buy a car, and the price of new car is actually less than buying the second hand car. NZ house pricing/distorted soo much, that we're already on top of the world (second to Luxembourg), we're outshine other big countries like OZ, UK, USA & Canada. Now, watch this ripple effect of $ distortion.. Local councils demand their cut; rates increases, Insurance demand their cut; increase premium, soon with multiple prolong roll over strikes, the workers demand about 123% pay rise to cope with the raising cost of housing. NZ is a nation of big ego, don't have humility willingness to learn in hard/painful way.. NZ celebrated the binge drugs addiction as the good way in life, it's only fair to say.. what comes next to them.