'Housing market in early days of upward leg, as first home buyers come out of the woodwork and investors retreat' - BNZ-REINZ survey

'Housing market in early days of upward leg, as first home buyers come out of the woodwork and investors retreat' - BNZ-REINZ survey

The housing market is in the early stages of an upward leg as growing numbers of first home buyers enter the market while increasing numbers of investors appear to be leaving it, according to the latest monthly BNZ-REINZ Residential Market Survey.

The fifth survey since inception earlier this year of about 500 licensed real estate agents around the country gave a strengthening perception that nationwide prices were rising rather than falling, BNZ chief economist Tony Alexander said. However that perception was being led by the Auckland market where there appeared to be strong buyer interest and rising prices, while in Wellington sellers continued to dominate leading to falling prices.

"These remain early days in what we believe is the start of the upward leg in the housing cycle, and it is likely that the turbulence in offshore financial markets will inject some caution," Alexander said.

"But assuming things settle down overseas we expect the simple fundamental of a growing under-supply of dwellings in New Zealand made worse by construction at a four decade low, and now renewed chances of interest rates holding low for longer, will see the market gain strength," he said.

However it would be interesting to see the extent to which the Rugby World Cup then the general election may disturb the real estate and other markets.

See Alexander's comments from the survey below:

Strong Interest At Open Homes

A net 20% of agents report more people going through Open Homes. This is similar to the net 23% in July and continues a string of such positive results. More buyers are out and about kicking the tyres.

Buyers Seeing Contracts Through

More and more written contracts are going unconditional with a net 23% of agents reporting this measure as improving compared with 20% in July.

Auction Activity Rising

More agents are noting auction clearance rates as improving, this month a net 13% compared with a net 15% last month. This result backs up the first two above regarding buyers not just kicking the tyres but signing up and settling.

Vendors Seek Information

Here we find a slight piece of evidence that a few vendors may be reacting to the increasing evidence of more buyers appearing by bringing their properties to the market. A net 4% of agents report that more potential vendors are seeking appraisals of their properties. This is the first positive result reported for this particular measure since April.

Investors Not Appearing

This month a net 9% of agents have reported that they are seeing fewer investors in the market. That is, fewer people are showing interest in buying property as an investment. This is the weakest result for this measure in the five months during which our new survey has been running and as the chart here shows the trend in this measure is decidedly downward. One interpretation of this result is that tax changes are scaring fresh investors away, and an important implication is that the rental stock is likely to tighten up even further.

First Time Buyers Dominant

This measure remains strongly positive with a net 27% of responding agents reporting that they are seeing more first home buyers in the market. That is, the improving residential real estate market which we are seeing in a range of numbers is being driven not by investors, who are increasingly absent, but by first home buyers.

Price Pressures Are Upward

A net 14% of agents report that they feel prices in the marketplace are rising. This is the second month in a row of such a positive result and undoubtedly it reflects the fact that the side of the housing trade moving here is more the buyers coming forward than the vendors.

Pure Balance Still Reigns

The result for this question is essentially the same as last month with only a net 2% of licensed agents reporting that they feel buyers are more motivated to act than sellers. Last month’s result was pure balance. We interpret this to mean that although there are more and more buyers in the marketplace they are not snapping up properties.

What are the main factors holding buyers back?

The problem with a shortage of listings has grown in the past month with 36% of the reasons given for buyers holding back being inadequate listings – either quantity or quality. Fewer and fewer buyers are holding back because they feel prices will decline, worries about selling one’s own property have eased, and perceptions of the difficulties involved in getting finance are about average. Having spent two days in Christchurch however earlier this week one can say that down their finance is a large issue, tied up as it is with the need to get insurance which is extremely difficult while insurance companies try to quantify the earthquake risk suburb by suburb.

What are the main reasons people are buying?

These measures are showing a tendency to not change much over time. However we shall monitor them because they may give some valuable insight further down the track as this upturn in the housing cycle becomes more developed. For the record, people are largely looking to buy a house because they are trading up or down, shifting town, or their relationship has broken up. There is a small upward trend in the number citing rising prices but the change is fairly small.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Tony Alexander and the REINZ: what's not to trust?

Brilliant statement.

Having just returned from the UK, and looking around at rentals and properties I'll just be leaving my money in the bank and renting. House quality is terrible. Damp, cold, mould ridden dark boxes seems to be all thats on offer at prices that are simply ridiculous for the quality of the house. I cant believe how bad most the houses are here. 

Even the "good" ones are rubbish. Not to mention grotesquely overpriced.

I can asure you there are some good ones, but yes there are some shockers and leaky homes are a major problem- but puts the good ones at a nice premium if you want to sell!

The so-called good ones (and it's relative: they're just not quite as awful as the rest) are already vastly overpriced.

Low interest rates seem assured for longer than some thought and this will underpin a housing recovery, so long as people stay employed and can meet the loan criteria of the banks- who will be competing for custom (already started)... and so long as people remain confident that National- led government  will win the election (beware of adverse reaction on financial markets if it seems the Greens will be in a position to wag the tail of a Labour -led government) There may be some disillusioned kiwis returning from Europe and even Australia, time will tell as to what will happen on that.  Probably will be steady as she goes in NZ, with some quietly continuing to deleverage etc, all good in comparison to many other countries, except having just come back from a busines trip to Sth Korea, we aren't doing as well as there.  A FTA agreement with India and Korea could be economically very good for us, might be easier to get with India. 

Low interest rates seem assured for longer than some thought and this will underpin a housing recovery

Hahaha. Good luck.


Good luck is always welcome, good management is always needed.  Troll, have a look at Tauranga, it's where numerous Aucklanders will retire to when they see how realively well off they will be by doing this, plus of course it's a popular spot for immigrants such as British and Sth African

Noponies - correct. I'm moving to Adelaide later this year, even there housing is higher than it should be, but lower than Auckland and the housing stock is generally much better. The house prices here might ALMOST be acceptable if the quality was also consistently high - but its not. A large proportion of our housing stock is GARBAGE. And I'm not just talking about "leaky homes" - plenty of non-leakies with poor insulation, poor construction, lack of flooding consideration with no elevated freeboard levels etc etc.     

these surveys are a waste of space, they've been proven to be poor indicators of future outcomes. And surely the greater apparent first home buyer interest is cancelled out by the lower investor interest?   

Alexander can keep talking up the supposed housing shortage all he likes - and he will. I think its exaggerated, and is at least partly mitigated by behavioral change (ie. much more students and workers in their 20s / early 30s living with their parents - bigger household occupancies).  

He is also basing his somewhat bullish outlook on the international scene settling down too - highly questionable. Even if things "settle down" the outlook is likely to remain weak and volatile for years


I agree Central Auckland is sadly expensive for what it is, however this obviously reflects high demand to be in the Central Suburbs.  Sydney and Melbourne suffer from the same problem.

If you compare to Central Christchurch, you can pick up a villa in "as is" post earthquake condition in a reasonable suburb for as little as $150,000.  A similar property in Auckland would probably be over 4 times the price (although maybe no earthquake repairs needed - however for a total do-up it makes little difference).  Even prior to the earthquake you could pick a do-up villa in a rough central suburb for low $100s.

There really needs to be some sort of encouragement to centre business activity away from Auckland, however this is unlikely ever to occur.  If you look at the fate of a city like Invercargill, which has declined since the 50s, it makes no sense to allow a city just to wind down while others boom.  Sections in Invercargill sold for around $1 and houses for single digit thousands as recently the early 2000s although they have recovered since then.

Surely as the Government is a large employer it would have made sense to have ALL backroom Government departments and organisations to smaller centres, rather than shifting them all to Auckland or Wellington, especially given their susceptibility to natural disasters.


Good point CJ. Invercargill is actually a wee gem of a place. Its consistently the most affordable city in NZ, its got magnificant recreational facilities(although perhaps the indoor stadium needed stronger construction in hindsight), a lovely park in the middle, wide roads, good schools. Theres stacks of money down there, the hinterland is some of the most productive pastoral land on the planet and theres also lots of industry so unemployment is very low, the licenceing trust fund everything. Its actually NZ the way we would all like it to be, especially as a place to raise a family. The issue of the weather is I guess the biggest deterent to people but I live up the road in Otago and really its not that bad....really!  

It bloody is bad, don't tell porkies now. That is why you don't live there lets face it.

You used to be able to tell the strength of the screaming westerly by the angle of the smoke out the Tiwai Point stack till the cleaner her up.

It is nice in summer, all two weeks of it.

Good move Matt, Adelaide would be my pick if I moved to Australia, my wife's sister moved there years ago, lovely city

yeah seems a nice place Muzza, I also like Brisbane. Not so keen on Sydney and Melbourne to live (nice enough to visit) - very expensive and rat races!

Adelaide is very nice.  Ive spent a bit of time their and would recommend it compared to melbourne.  If you want to go regional in Victoria or SE/SA (im sure you wouldnt but plenty of opportunities in regional auz) you can pick up a nice house with a 100 ha for under 300K -  rent the ground back to a cropping farmer or grazier for 10 - 15k or run a few ewes and make a bit more.  Its not the dry barren place that people make out.  It hasnt stop raining in the last 3 years in southern auz.

Spent 16 happy years , based in Adelaide .. And now that they're ousting the Kiwi who runs the show ( Premier Mike Rann ) , I just might go back there ! ...... Glenelg , Barossa Valley , Riverlands , Rundle Mall , Victoria Market , the " Port Power "  football team  : Frigging oarsome with a capital " O " .

Why did you leave and go to NZ (apart from Mike Rann) ?  Im very happy to be back on the mainland and off that inbred island south of Melbourne.  I just wouldn't consider going back to NZ - even though I do love the place.  I miss hunting and the tops but could never consider going back.

Pappy Gummy was getting old , and I'd been retrenched from my job ...  . So I went back to Canterbury  . Had 10 good years with the family in NZ . But Pops has gone , now  . And the spirit of thrift & free enterprise  seems to have left the scene too .

9 years of Helen , and then 2 years of Jolly Boy ..... couldn't take any more of the social welfarism ,  the  " entitlements "  , bail-outs , free this , free that ... just too much government spending , crowding out private enteprise .. .. a sure path to economic crisis .

NZ could so easily be so much better . But under MMP populist politics , I can't see any meaningful redress of the  fiscal  imbalances .

Tony Alexanders said "..renewed chances of interest rates holding low for longer,..". So ask yourself the obvious question, Tony...why?! It's not because there is going to be a stampede for mortgages, otherwise the interest rates wouldn't stay low. I don't know of any business that continues to keep prices low if they can raise them. And in the case of money, mortgages, that happens if people want to borrow it. So, in effect Tony, you are suggesting that there is a "renewed chance" that prices of property will fall, as the demand for the asset that buys it, debt, also falls, or "holds low for longer". 

NA - exactly. If the OCR stays low or goes lower it is a reflection of a weak / weakening economy and likely high-ish unemployment, in that kind of scenario any house price stimulatory effects of the lower OCR will be cancelled out by the low housing demand borne out by the weak economy  

What's missing here? Um, what did the other 86% say? This guy must surely be an embarrassment to the BNZ?

Price Pressures Are Upward

A net 14% of agents report that they feel prices in the marketplace are rising. This is the second month in a row of such a positive result and undoubtedly it reflects the fact that the side of the housing trade moving here is more the buyers coming forward than the vendors.

A net 14% means that subtracting the percentage of negative responses from positive responses you get 14%. It could be 50% saying it's rising and 36% saying it's falling, for instance.

Chris_J - good thoughts there. I actually think though that population growth will organically decline in Auckland, although I'm not against some active policy in encouraging population away from Auckland. I don't believe the projections made for population growth in Auckland for the next 20 years. Why? Well the main reason is that not enough houses will be built to accommodate the projected growth!!! The new Council don't look like they will allow much greenfield development, and all sorts of barriers are in the way of any substantial intensification occuring. Also I think we'll continue to see lots of older Aucklanders moving out to centres such as Tauranga, Warkworth etc.    

A good semi-hypothetical, MIA, that I hadn't read before..."..Where are we in 2015?"

"...Over 90% of the people think that stock markets are dead, that life is horrible and that there is no reason to be optimistic. Depression exists in Japan and the western countries. A staggering amount of wealth has disappeared through the deflationary process."

NA - a nice thought provoking piece, with a reasonably optimistic ending

Key finding - cash is king, with some good likely buys around 2015!

Wealth?  So many folk forget that most of it was spun into existence as debt, and never became anything else. It wasn't so much lost, as never had.

i've subscribed to cash is king for quite some time now MIA, but looking aoround me i'm starting to feel a tad nervous about where i store my cash as the global and perhaps local banking system looks a bit shakey.??

The place we were renting has just sold at mortgagee auction after the PI went bust. We looked at buying but there is not much out there, poor build quality and asking prices at or above 2007 highs.
The low interest rates are appealing but after losing 6% of our potential deposit on the markets this week it seems better to rent and wait. There have been quite a few sales lately but they are families shifting into the area rather than PIs.
The age of deleveraging has begun and that will flow through into the property market despite the optimism of the REINZ and gung-ho bank economists.

Seems to me that much of our housing is rubbish because the average PI runs a budget that makes no provision for capital improvement and inadequate for R&M.  As a resut, the average rental property declines in quality year on year. 

This decline leaves to the inevitable difficulty of getting decent tennants and thus the rot accelerates.  I have seen so many decent streets dragged down by crappy rentals and their tenants that I only hope the market gets rid of them ---the sooner the better.


yep thats a factor Rastus, but its even more fundamental usually than that - poor design and construction techniques and materials  

Don't get me on that one, as you know:) 

I am an inventor as much as designer so expect to see quite different outcomes from me.

I dont agree my observations from looking at a lot of houses many ex-rentals is they are generally easy to spot....so no I dont agree on poor design, construction or materials....10~20 years of no maintenance but a quick lick of paint to sell, shows them up easily. Homes from home owners on the other hand are usually in far better age for the same build.


Rastus, you may be right about PIs and delayed maintenance, but that's kind of irrelevant. The point is the build quality of new NZ homes is worse than US, Europe and most of Asia. I can't comment on Australia as I haven't compared houses there. So it doesn't really matter what R&M you do you still own a dog whether you are a PI or homeowner.

OMG did I really write in agreement with Matt. I may have to go and kill myself..

ah ha ha ha ...ha ha cough cough

The whole report is full of contradictions.

Wonder how this scenario fits into Tony Alexander's spruiking.  A number of properties in the area I am keeping an eye on are listed for a few months and are obviously not selling at their inflated prices.  Once they're removed from the market they turn up later on as a rental.  They have not sold to a PI as i check this as well.

Also, how many properties will hit the market after the RWC?

Regarding the low interest rate staying low for longer, i think Tony Alexander has a point. Some pointed in the comments here that low interest rates indicates a low demand for borrowing. This would be true if the interest was set by the market, but since we have a planned economy where interest rates are set by central banks in an attempt to control the markets, this is no longer valid.

Fact is that central banks dump the interest rates every time there is a hiccup on the stock markets. Fact is also that people tend to borrow as much as they possibly can, and then some. So, as long as rates are low and the banks are willing to lend, and of course they are since they know they will be bailed out if the shit hits the fan, people will borrow and push the prices up.

My conclusion is that to see where prices are going, all we need to look at is the banks willingness to lend money, combined with the interest rates. These are by far the most important drivers of prices. I think we still are quite far from debt saturation, plenty of fresh meat out there...

I think you are very  wrong, its not banks willingness to lend, which they are, but ppls willingness to borrow...


Dog chasing its own tail steven...the long term answer is for borrowing to be a right that adults can only receive if and when they prove themselves capable of saving and of prudent financial behaviour. Go read the other post on this site about fools buying shite they don't need on tick and paying up to 500% interest and paying twice the price for the shite....do you think these "adults" are capable of being prudent when it comes to money....?

There is a large % of the population that is allowed to sign up for mortgage credit but they are incapable of counting to 100 and wouldn't know a decimal point from flyshit on the wall.

The fact that ppl see inflation and even hyper-inflation in the future and others such as myself see deflation sure seems to prove there is a huge diversity of economic nounce and opinion...we cant all be right.


Steven we need a name for these ill informed people who see inflation.

How about "deniers " ?


How bout...Pneumatic Pricilla's..Kermit....blow up dolls.

I think people borrow as much as the bank says they can. A few first home buyers I know seem to have the notion that if the bank thinks it's OK for us to borrow this much then it must be OK! These first time buyers all have mortgages of over $500,000 on their first homes in Auckland and haven't yet had kids - crazy! For a couple it means they will both have to work forever, and if they lose an income they are stuffed.

I would require all borrowers to pass a test to show they understand the consequences of their decision...and a test not carried out by the parasitic banks...but by a branch of the FMA and a user pays charge would apply...an inability to pay the charge would mean auto failure.

But the govt would never..NEVER ever institute such a law as it would threaten the easy credit based bullshit that passes as an economy.

No reason why the test could not be carried out on all year 13 students...indeed it should be so that only those who pass can take out student loans.

But the govt would NEVER ever allow that either because it would expose the sickening lack of understanding on basic financial matters in this population. Just ask Tolley!

Geez wol you're always trying to push more bureaucrats down our throats.........

Well i think you confirm my point here. As i pointed out, history shows that people are VERY willing to borrow, regardless if they can pay it back or not.


What a load of bloody rubish...Simply take a look at re sales in the last 12 months.

In a suburb in Auckland the higher priced houses have not sold as many, the run down rental that needs a quick flick and sold on is approx 12 to 15% of sales..not 1st home buyers..well maybe a few, but a lot of these being flcked on people are renting out as long term investments.

Maybe these people keeping stats should separate the re sales...and ID the 'value added' ones to get better undersanding of what part of the market is selling, and correctly ID the sellers and buyers...Not just look at a sheet of stats on their desktop and make assumptions.....(we all know what  ass-u-me is ) 

Wolly you are a mouthie dude.... but this time I have to agree, so many of the borrowing public have the herd mentality, thinking that debt is something that will look after itself. Wrong. As seen in the last few days the swings in the financial market has been dramatic and a sign of perhaps even greater things to come. We are in a time where caution with regard to excessive borrowing would be advised, the shiney suited banker boys are now racing to keep they hit rate up, as their masters demand ever higher sales levels.

We are in a time where caution with regard to excessive borrowing would be advised

Ah..what?   in time now?, it is eacessive borrowing that has got us into this poo in the 1st place...excessive borrowing is when ever one owns less than 1/3 of what they posse....Step outside that and thats when the perverbial starts tro hit the fan, and if outside the 1/3, and the proverbial is hitting the fan, you are likely to also hit the fan.

My sister-in-law sold her two bedroom grammer zone unit for $430K yesterday, $100k more than she paid for it about two years ago.

She's going to ask the IRD to regard the gain as taxable..right?

So we'll all whip round for a post sale PARTAY...Gareth..help her write down some of that excess payola....

Grammar people know how to party..!

Too late Christov, the party was last night...

Damn it Gareth...been the story of my life this year....I got to get off this pooter...n hook up out there again......

That said I've met a lot of party types in voluntary work....but maybe not the kind of parties you'd wanna fall asleep at....< :"

Gareth would have invited you, but it wasn't meant to be a demolition party.


Cheers for that Scarfie.....

golden rule...never brag about capital gains on public blogs, gareth...we're already accessing your sister-in-laws files as we speak

best rgds


Ther perception of 500 real estate agents, is this a comedy show?

It would be like looking at one of those magic eye posters with all the pinstripes and pink shirts....so non threatening....

The ones where you have to go cross eyed to get it?

I have been out with the agents in my area looking for a property.

In the area there are about 200 salespeople and only 50 odd sales last month.

Yet they all told me how they had a record month and that their office was doing so well.

Therefore my survey for July shows sales in my area up at least 400 percent  more than the stats!

FYI Barfoot figures out today show the average weekly rent in Auckland in July was NZ$417, down for the second month running.

However, it's up NZ$9 or 2.2% from a year ago.

More here





What would be far more interesting and objective would be the historical data from the Dept of Building and Housing http://www.dbh.govt.nz/market-rent. Unfortuantely its not accessible.

This is nuts. "Property prices are on the way back up - yippee".

Petrol prices are on the way back up too. Yippee?

Both petrol and housing, are costs to the economy.

Housing is not "wealth". It is a "necessity". In so far as it IS "wealth" to a few speculators and deceased estates (every one else needs to actually LIVE in their "investment"), it is a wealth TRANSFER from the poor buzzards at the bottom of the Ponzi scheme - the first home buyers.

Look at THIS:


The low property price cities, have FAR HIGHER "discretionary incomes" than the high property price cities. Which cities have an economic future?

It is just plain nuts to NOT "do what it takes" politically, to put stability and low costs back into the property sector. And the more I learn (I have been at it for a while now) the more clear it is that it is interferences in "supply" that remove the affordability and the stability from the property economy.

I won't waste my time any more on people who still are too stupid to see this.

Come on Phil, you used you whole weeks rants in one go yesterday.

I didn't mind a lot of it mind you.

He's right about that bit - folk used their 'equity to lever, and the demand for something to lever raised the bidding on the 'equity'.

Pulling itself up by it's bootstraps, it was.

But - where he gets it wrong, it that the process was the inevitable manifestation of exponental growth demand - folk had nowhere else to grow, They'd done the obesity thing, they'd done the 'from one income to two' thing, they'd done the weekend trading thing - what was left?

The next doubling was a doubling of the last - they couldn't tell 'Hugho to you go' much more, certainly he couldnt become 4 times then 8 times as obese, so it had to be in housing. To be more precise, it had to be in artificial inflation of 'values' of something big, universal and existing.

If housing values drop, he can kiss growth goodbye - for a long, long time. Which means he can kiss the fiat system goodbye.

Which means that clinging to a selected piece of history (median multiple) is silly.

Yes when they started going 100%+ mortgages, necessitating two incomes to service it then there isn't a lot of room left to grow.

It is one of the reasons that I saw this whole shebang pending during the heady days of the last housing boom in 2004. A bit of a late starter on the scene i know, but I have always intuitively known something was wrong. 

I tell those around me to forget about denominating things in dollar terms, it will become irrelevant. 

My hope of course is that acres per troy ounce will move in my favour:)

And I think that it will refer back to energy at some point. Perhaps Kw of solar collection per acre, or tonnes of biomass etc etc.

Scarfie, there has never been any reason other than political ones, that "housing" cannot be provided at 2X average incomes, regardless of the conditions of "credit". The only reasons there is no modern day Bill Levitt in NZ, are political.

The only reasons that in the free-est land market in the world (Southern and Heartland US) they no longer build "Levittowns", is that even the "McMansions" they build are so affordable, that the "trickle down" of real estate provides the "2x" income houses - 20 to 40 years old.

The difference here is the land prices. Now we have poorer folk complaining, quite fairly, that their 70 year old home is cold, the roof is rusty, and the piles are collapsing. The house is worth almost nothing. The piece of dirt it is on is "worth" $400,000. There's your problem.

We need to get the price of the piece of dirt down to $40,000 at the urban fringe instead of $250,000, then the price of the piece of dirt in the established suburb with the "fixer upper" houses, might be $120,000 instead of $400,000.

I am not talking about something that does not exist in the real world. It does, and could exist here. The reasons it does not, are political.

I don't doubt you Phil, but I think both credit and constraints have contributed, on top of the assumption we have infinite resources at our disposal. It is why the downward slide is going to be ugly.

But I always some at this from a design angle. Our current urban designs are dysfunctional and appalling, as it Levittown. I think the mistake you make there is the you advocate lack of planning, whereas Levittown was very much a planned community.

You fell into my trap really, as I have just been reading about Frank Lloyd Wright. Bills brother Alfred served as an apprentice under FLW at Taliesin in the late 30's. He would have worked on the Usonian Houses, as well a Wrights Broadacre concept. Although it shares some similarities, he basically bastardised Wrights work and the house designs pale in comparison to the work Wright did. Keep in mind Usonia 1, the Jacob house, only cost $5500 USD including land in 1936. 

Wright was more about cooperative,or decentralised living. He despised the city. 

I actually think Levittown highlights all that is wrong with capitalism, where the product that makes it to market is not related at all to what is the better product.

I did a major project on Usonia 1, and it really is sublime.

I remain sceptical of any form of planned society, although I can see where it works on the 'street' level.

PDK, the options are, and always were:

1) Allow access to agricultural land for urban fringe development. MAYBE build a few too many houses, maybe in the "wrong" place. THE PRICE OF ALL URBAN LAND STAYS LOW.

2) Ban fringe development. Watch the price of ALL urban land "bubble".

Do the maths. 1 million homes inflated in "value" by $150,000 each, versus "how many" new homes "too many", times the price of those?

It is impossible to hurt your economy a fraction as much by "unconstrained development", as by "constraining" it.

I have been round and round on this point. Why nobody get it?

It is like "oh, no, we can't allow unconstrained development", and then we turn round and whammy our economy with 20 times the cost, for precisely NOTHING. That is what a price bubble is - money being paid for NOTHING. We've paid the price of "unconstrained development", TIMES TWENTY, and we haven't even got the unconstrained development to show for it........!

Phil, you are right in what you say but our government have encouraged real esate investment over other forms, that is one of the reasons it has done so well.

I have been saying on this website for a while that we should have maximum LTV ratios imposed by law for buying real estate - I would suggest 70-80%. This would make people actually SAVE for a deposit, instead of just leveraging up to the hilt like they have been. This would also get the savings rate of the nation up as banks would have to compete for deposits (there would be more cash looking for a home and less debt).

It's a simple solution that is fair across the board. First time buyers might have to save a little longer, but then property prices will be kept in check so it's a win win all round.

That hasn't worked in Korea.

They have LTV ratios stiffer than 50% and never more relaxed than 50%.

Lawrence M. Hannah; Kyung-Hwan Kim; and Edwin S. Mills; (1993) "Land Use Controls and Housing Prices in Korea"; Urban Studies Vol 30 (1).


Korea, at least at that time, had extremely weakly developed systems of financing house purchases: most people SAVED MOST of the purchase price of a house. So their house price bubble(s) at that time had NOTHING TO DO with "easy credit", and were all about land supply. In fact, the higher Korean house prices went, the GREATER the amount of private savings accumulated, as desperate young people saved ever more money without actually getting to spend it on a first home.

For RECENT Korean experience, see:


The government tweaks mortgage loan-to-value requirement ratios from 50% to 60% and back, according to boom/bust conditions, and they STILL have volatile property price trends.......

There has been endless discussion of the role of “easy credit” in the recent episode of housing cycles. Korea provides an outlying counter-example of a combination of unaffordable housing and extremely difficult credit conditions.

THE deciding factor is "land supply". Everything else is just tinkering while the ship burns.

Yes but South Korea is a majorly wealthy country, and was the only country to NOT have a recession throughout the GFC! Obviously their savings culture has worked. They may have a land shortage, but they are buying houses mainly with cash, that they have earnt through hard graft and probably creating companies which export stuff that the world actually uses!

Needless to say you have not convinced me that maximum LTV ratios are a bad idea, if anything I am more convinced than ever.

This is taken from wikipedia:

South Korea has a market economy which ranks 15th in the world by nominal GDP and 12th by purchasing power parity (PPP), identifying it as one of the G-20 major economies. It is a high-income developed country, with an emerging economy,[6] and is a member of OECD. South Korea is one of the Asian Tigers, and is the only developed country so far to have been included in the group of Next Eleven countries. In 2010, South Korea was the sixth largest exporter and tenth largest importer in the world. South Korea was one of the few developed countries that was able to avoid a recession during the global financial crisis,[12] and its economic growth rate will reach 6.1% in 2010

And as I have said on this blog before high LVR is not something new: difference is that banks have replaced those Building soccieties, credit unions, solicitors nominee companies etc who used to provide funding by way of second and third mortgages.

I starting being involved in residential lending in early 1980's in most deposits for new home buyers in that time were in the 10% to 15% space and often the deposits also included capitalised family benefit and Govt matching via Home Ownership accounts.

There has been a whole range of reasons why we have seen the housing bubble and banks going to 100% LVR is just one of then. In fact the key driver of house prices has been the low interest rate inviroment which are now embedded which has reduced debt servicing costs / enabled pepole to service higher mortgages (thus driving up demand side).

Which moves onto whether we need a CGT. At peak of market 2004-2007 I would have seen 1 in 4 loans being a rental with a sprinkling of first home buyers.

I now see a high portion of First home buyers with rentals being more like 1 in 20 and no speculaters.  I think the Govt move on depreciation has taken a lot of heat out of the property market without having to introduce a new tax full of loopholes.



I don't mind broadening the tax base. I am in favour of land taxes.

I DO mind people suggesting that a CGT prevents property price bubbles. I'm not accusing you of saying that.

It is doubly ironic when the same people say that "NZ is the only country that doesn't have one", which means they SHOULD know that every country WITH a property price bubble, EXCEPT NZ, had a CGT. And it didn't halt the bubble.

The Japanese tried hiking the CGT rate as their bubble expanded in the late 1990's. It was at 70% quite early on, and went to 130% at one point. They were DETERMINED to stop the bubble with the one policy tool.

The only thing that has ever guaranteed low, stable urban land prices, is genuine free market development on fringe land at prices that represent agricultural (economic) rents with no "planning gain".

Hi Phil,

Totally agree that land prices have been a key part of the bubble and the lack of planning / willingnes of councils to allow land to be opnened up.

"I DO mind people suggesting that a CGT prevents property price bubbles. I'm not accusing you of saying that."

"prevents" Who said that btw?


Totally agree with u Philbest...

It is madness....    Look at this Auckland supercity.....   They are doing everything expect addressing the issue about affordability of housing....  let alone doing something about Auckland having a future housing shortage.

Like u say... housing has mutated from a "necessity"... into some kind of "finacialized" monster that serves the whole banking industry... ...creating debt slaves.

U put it really well.....   run for parliment, or mayor...and I will vote for u.!!

Cheers  Roelof

I swear Bernard puts that idiot Tony Alexander's comments here to stir up a hornets nest! Oh well, I guess a job like his in NZ doesn't really entail much more than trying to gee up the property market.

Just remember that Tony stated in a Herald article a couple of years ago, that running a persistent current account deficit will eventually lead to hyperinflation. He stated that it wasn't and matter of 'if', but 'when'.

So a confirmed idiot then, he'll be shocked at the Depression he's about to witness, just shocked......If he ends up in a tent city where many first time buyers he has so selflessly encouraged will probably end up, I'll be content that justice will have been done.


We don't have no Hornets...Wasps yes.

Alex:  seriously now mate, did you just put this nonsense onto the site to wind people up & get a good long thread going??  Be honest now.  It can hardly be seen as anything like dispassionate and insightful analysis! 

I think some of your items are just designed to be provocative.

Cheers to all. 


... especially when your colleague Mr Hickey posts headlines like:

"REINZ figures show median house price falls 4.2% and sales volumes fall 5.8% in July from June; REINZ cites 'mid-winter breather"



Cheers to all.


see your point, but it's good to see what the sentiments are out there, even if i don't agree with it. i'd rather see what all the tosspots are saying than not knowing about it.


Don't believe the article guys. Keep your faith and the "crash" will happen. After all that was the prediction coming from those in the know. But be patient, maybe give it a few more years...

Excellent, just keep buying....


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