BNZ economist Craig Ebert says our housing market is over-valued by 25% because of artificially low interest rates and to ignore this imbalance 'would be irresponsible'

BNZ economist Craig Ebert says our housing market is over-valued by 25% because of artificially low interest rates and to ignore this imbalance 'would be irresponsible'

By Craig Ebert*

Those propounding that the Reserve Bank should maintain very loose, even looser, policy, on account of the slow CPI, should take another look at New Zealand’s housing statistics.

These suggest a major imbalance is still stalking the NZ economy – one that might only be redressed by less interest rate stimulus, not more. Namely, that NZ house prices, having never really shaken the bubble they formed over 2004-07, are threatening to blow bigger again.

Yes, we know the argument that the fundamental problem is with housing supply, not so much housing demand. Indeed, we agree in large part. The best solution, in this case, would be to increase the supply of new homes, especially with recourse to less-pricey bare land to build upon. And for listings of existing homes to increase from their recent trickle.

However, to the extent that such supply-side responses cannot be assured, and soon, we’re likely to be facing increased upward pressure on house prices. It’s rather like wishing the economy as a whole could suddenly become more efficient, in order to keep demand pressures at bay. Fantastic if it can occur.

But if it can’t, then one has to be conscious of inflation.

It’s where reality takes over from a nice thought. So there is onus on the supply-siders to show how their solutions are at hand. But that’s not  to ignore the demand side of the housing market equation. Sure, demand and sales are not what you’d call strong, which is why agents don’t see the current situation as another boom, even though prices are definitely still  bubbly.

However, activity has certainly picked up over the last year or two, and has some momentum about it. This is indicated in the BNZ-REINZ Residential Market Survey and obvious in mortgage approvals.

Such things are all the more interesting given New Zealand’s population growth has slowed to its mildest pace since 2001, as net immigration has turned slightly negative.

The latter tends to be important for housing ups and downs.

This is another reason not to expect sales to get back to where they were in the previous boom (when net immigration was sky-rocketing) before they are judged relatively strong. Sales over 2004-07, in other words, were a great anomaly, not to be repeated in a hurry.

In thinking about the demand side of housing, nor can we ignore the fact New Zealand’s retail interest rates are about as low as they’ve been not just in a generation, but more like two (and not just in mortgages but in many business and farming rates as well).

Should we be surprised, therefore, that house prices have been sustained at pricey levels, and are beginning to heat up again?

To wit, the Stratified REINZ Home Price Index has recently posted an all-time high (as has the REINZ median price), having increased 3.4% over the first six months of 2012,on a seasonally adjusted basis.

And while Auckland’s lead on this front is purportedly owing to internal population drift we wonder why the rest of country hasn’t seen price corrections as a consequence.

Why Wellington’s home prices haven’t come down at all, despite a restrained public sector. And while Christchurch home prices are rising partly on obvious supply problems there is clearly enough demand pressure around to drive this.

Yes, we appreciate that nominal prices are not the be all and end all of home valuations. Fundamentals such as incomes and rents always have the opportunity to catch up, over time. Indeed, this is exactly what happened post 2007. However, that process stalled from 2010 leaving the various valuation metrics stuck very much on the high side.

In other words, the 2004-07 house price bubble that has now well been acknowledged, long after the fact, never really popped. We get this impression from looking at:

- The trend in real (CPI-deflated) house prices

- The valuation of New Zealand’s housing stock in relation to total household disposable income

- Nominal house prices compared to rents (or its inverse, rental yields)

- House prices to weekly earnings

They all paint a picture of New Zealand’s housing market simply less over-valued than it was – so still pretty pricey, and threatening to increase its degree of over-valuation.

These macro-economic metrics, of course, were the same ones we consulted in late-2007, early 2008, when we came to the conclusion the market was around 30% above fundamentals. While this was not the same as forecasting a 30% price drop it did suggest to us that NZ house prices were going to struggle – in terms of either coming off a bit and/or marking time while fundamentals such as incomes and rents caught up.

That New Zealand’s housing market is stuck in clearly over-valued territory is a bit of a worry. Especially in that it might mostly be a consequence of the very low interest rate settings in place at the moment.

To ignore this probable imbalance would be irresponsible in this new world of ours, where it’s the big stuff, including balance sheets, that matters most. Not so much the immediate progression of GDP.

Of course, there is a way of testing the notion that New Zealand’s housing market is being unduly propped up by extremely low interest rates. That is for the RBNZ to remove the degree of OCR stimulus it has in place. Yet the Bank probably feels averse to doing so. Not only because it might actually cause a proper correction in home prices, back to sounder economic footings. But also because of the wider economic distress any OCR lifts might cause.

Then there are the ever-present risks from abroad that might make any domestic rate hikes appear ill-timed and foolish.

It’s a very uncomfortable position for the RBNZ to have put itself in, with its 2.50% OCR.

But might a re-bubbling local housing market force the Bank’s hand before any supposedly inevitable collapse in the global economy?


Craig Ebert is a senior economist at BNZ.

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?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


Comment Filter

Highlight new comments in the last hr(s).

Get out of the main centres and house prices are not now what they used to be.  Even in a growth city like Tauranga, prices are down from the peak at least 10-12%.  So it isn't corrrect to say prices haven't come back in many parts of the country.  Whether there will be a resuge in prices, I would say there won't be as in general it's neither a seller's or buyer's market these days ( Auckland and Christchurch excepted)

Hold that thought. It is an "Auckland" problem.  The causes are starkly evident. But the talking heads talk about everything but the causes. 

"Talking heads" are waiting for inflation to eat away the housing bubble....pity inflation was only 1% for last year....good analysis here from BNZ

Trouble is, the OCR is a nation-wide lever. Do you pull that lever into the up position to correct an area-specific problem? I dont think so.

The elderly and their favoured retailers would disagree - as a relatively large segment of the consumption cohort their reduced spending power has been missed by many desperately hoping for it's return. 

I find it interesting that the NZ banks seem so desperate to talk up interest rates.  In the USA its record lows....I wonder if they spew the same line? would be telling if not.....I can but assume that their wholesale lending / margin (or bonuses) is a worry for them and a rising OCR would give them an excuse to raise rates.
NB If you look at China and Japan they save as a matter of course, they get virtually no a mind set for the elderly to be got over.  Think I read that finance companies were now slowing down the intake of money as no one is borrowing.....
In terms of "its return" its hard to see this being anything less than a decade event when it really starts....and 2 is quite realistic IMHO. 
I think of it as a druggy looking for his next high....adicted and only happy when spaced....the downer sucks and this one will be one cold turkey...

The OCR is nation wide but LVR limits would still allow first home buyers get in to the lower priced towns and areas in the main centres. Someone with $50k saved up and an 80% LVR would get a pretty respectable first home in many areas.
Auckland operates in a parallel universe. 

Cities are totally dependent on fossil fuel.  They're the 'engine-room' of nothing. Globally, they' haven't the lead-time left to morph, either.
It's energy supply will strangle your impossible wish.
Don't blame everything else.

Mist - they drive (fossil fuels every day gone forever) to tilt-slab boxes, and buy little bits of the planet, with their 'earnings'.
There was 100% disconnect between the bits of the planet and their proxies, but nobody noticed while the supply could be kept up.
Being exponential, the supplies (and the growth in consumption required) couldn't keep up.
You could see it coming - bigger houses=more consumption, weekend shopping=more consumption, obesity=more consumption.  it was never going to be sustainable.
Those who claim such a process to be "sustainablle' have to compound untruth on untruth to make some cranial sense of it.

Mist - I was too. If you sell to each other, it's a zero sum game. The only real wealth is when you introduce inputs, meaning 'bits of the planet'. Not surprising, given that that is what we end up buying.
Exporting only looks for a different echelon of consumers, which eliminates the need to buy at home.
But it still needs those o'seas consumers to extract bits of the planet, and sell them, to create the real wealth to buy your stuff.
We have a problem with measuring wealth - GDP is a piece of nonsense, and we fail to value Natural Capital at it's 'trend-to-total-depletion' cost. Had to bite us in the bum at some point.

An economy based on making itself bigger is no economy.  The modern economy has evolved based on cheap high intensity use of fossil fuels. This has created cities where great specialisation by humans works well, and suburbia were they move back a forth from this is no longer the viable, therefore how we live and cities have to change.  Therefore our nation has to change.....

So the message for a first home buyer like me is "wait for the bubble to burst for a 25% discount".

Depends on what you are buying (house, apartment, central, fringe?) and where (Auckland, Christchurch, Duneduin?).  Prices have gone in very different directions depending on what and where - to make generalizations like this article is rather meaningless.
You can already get much more than 25% discount on some things (relative to the 'peak'), but if you're expecting a 25% discount on other things you might be waiting for a long time.

My view is we are heading ofr a Greater Depression, so not losing you momney is the name of teh game.

Too true , it's a bloody sad day when you lose your mommey ...
........ofr sure , that is teh truth ......

You are a right little nkow full well waht he was saiyng.....I have the affliction and try to stick to palindromes...tut tut.

A Grater Depression is when the missus uses the last of your favourite aged gouda cheese in a bloody lasagne !
regrads , Gmumy

Or that perfect red in the spaghetti bol!!!

My last bottle of the Penfolds bin 128 , 2005 vintage ...... oooooh , the pain , the pain of it all .....
..... sniff !

My view is we are heading ofr a Greater Depression, so not losing you momney is the name of teh game.

Forget not losing it steven...spend it before it's worth nothing..that's the name of the game.
No point in having a fat wad in a frozen bank account earning stuff all, when you could have a pantry loaded with grub and a cellar full of plonk grog and spuds.
All fat wads will be debased to be worth sweet fanny adams by our brilliant RBNZ and useless govt.

inflation works for no one. hence it's called inflation and not profit. You do realize your bank interest payments, inflated annual rates, insurance premiums, maintenance costs, are not going in your pocket right?
Most people in the world rent, most businesses's not a stupid financial choice by any means. Anyone saying it is has fallen for the REI BS!

" The banks don't usually say the housing sector is over inflated " in the same way that turkeys don't usually remind you that Christmas Day is nigh ......
..... either / or , someones' on the wrong end of a right old plucking &  stuffing , and I'm betting it's not the bankers .....

Great post Mist42Nz
Some very good advice here. I pretty much have done what you said and so far so good.
I'm actually 31 now. Bought a house when I was mid 20s in the old Waitakere City. We managed to save one income and use it to pay off the mortgage quickly. Then in 2009, 2010 bought a number of rentals and they are all paying themselves off by the tenants rent. I'm also using the low interest rates to pay down chunks off the rentals. In ten years time I will have three rentals paid off.
We have 3 kids and another one on the way in the not too distant future. Wife stays at home with the kids.We still live out west.
If we wanted too we could live in the "leafy suburbs" or "double grammar zone" but to me its a huge waste of money to leverage yourself up to your eyeballs and have both parents working fulltime so in the future your kid can attend a decile 10 school.
I know plenty of guys and gals (genYandX) who went to decile 10 schools and they are no better off than me and a few also went right off the rails. I have nothing against central aucklands I just value evey dollar I make :)
Here's my advice for the late teenagers/early 20 somethings coming through:
-Don't have a gap year and travel. Do your OE in your 50s
-Get a full time job straight after school or Do a Uni course (not a sport and rec degree) that you know what your job/vocation will be when you finish
-Get a partner early on, have kids as quick as you can (if you want them)
-You and your partner should not have the same jobs (spread the risk here-althhough I do know plenty of teacher couples)
-Save a deposit by saving one income and renting as cheap as you can (this may mean in a one bedroom sleepout, garage and even cheaply with mum and dad). In 1-2 years you will have a great deposit. There are still plenty of good areas in outer Auckland to buy your first home
-If your going to buy DONT rent in the flash part of town. You wont save a deposit as your rent and expensive lifestyle (drinks on fri, lunch on sat and sun brunch reading BH's herald article on Sunday) wont allow u to save
-Don't aim to buy your first house in the most expensive part of town. I really chuckle every month when the affordability surveys comes out and the herald runs stories on 30 something professionals struggling to geta deposit to buy a house in central Auckland
-Get health insurance (specialist and surgical) as early as you can afford. After your 50/60s. The early 20s/30s are the other decades you will get the nasty cancers and diseases.
-Schools. Just because it's a decile 10- school doesn't mean it's awesome. The Decile is reflective of the socio-economic area the school is in and so the declie rating is actually in my mind the "amount of funds the school receives from the Govt rating". Do your home work. There are some great schools with great teachers in the suburbs. Find out who the principals are go in and will know after 5min if it's a good school.....
-Don't buy a flash car until your 50s. Our cars are 15 years old + each

On the money Mist.
Managing expectations.
Avoid being sold the "dream" (financial sales types know what we mean).

Haha '25% discount' you'll be lucky with a 50% price rise!

'to ignore this imbalance 'would be irresponsible'' - why we have been ignoring it for years?

I agree that this house price issue only relates to Auckland and Christchurch - and in fact, it doesn't even relate to all of auckland, it's only certain pockets.
Talk to anyone who owns a house in Wellington aswell as any other parts of the country and house prices have either been flat (Wellington) or dropping slowly elsewhere for years.

In some situations, monetary policy is a blunt instrument. Couple of years ago, the RBA was in OCR raising mode because the resource mining states of WA and QLD were going gangbusters and ore and coal prices were going through the roof, the remaining 5 states let out a cries like stuck pigs, because they weren't sharing the fruits of the boom, but the increased interest rates hit everyone right across the board. Monetary policy is a shotgun, not a rifle. Only fiscal policy can achieve targetted corrections. LVRs is a good start.

The Greens have gone Socialist.
That's no use on a finite planet.
It's just diffent people getting the resources.
Notice you haven't got in touch to enquire about cheap. energy-efficient housing, despite the open offer. Perhaps that's not really your goal........

Down with people I say..... PDQ, PDK.

but pdk, it's OK for you to have x hectares of land for the pdk bunker etc, just not anyone else ... right?

Yeah , he's hoarding too many of the earth's limited supply of atoms ....... it's a finite planet ....
.... we have reached " peak atoms " ..... they're not making any more , you know  !

I'm personally converting as many of my atoms into methane molecules as I can  ...... I figger these'll assist global warming ....... 'cos it's been a tadge cold this winter .......
..... care for some Thai green curry , Hugh ? ....... no dog in it this time , I promise , it's purrfect !
Atoms ! ..... where would we be without the little buggers .....

Robby - if I'd been on the Titanic, I'd have been pointing out - not that many would have wanted to hear - that it was all down from here. I'd have also been making myself a raft, and launching early.
I see no problem with doing both.
Mind you, we share this place with a lot of young folk, because we understand they're the ones being shafted, and given no options.

....... if it's any consolation , PDK is permanently grumpy with me too , Hugh .....
But it's swings & roundabouts as they say , 'cos the Gillette Corporation of the USA are seriously grumpy with PDK ...... he hasn't bought one of their safety razors since 1973 ......
and there's a few below it.
No fun at all.

The Levittowns of North America, from NJ to Philly to Stockton, California, are ghettos now. Cheap to build, they are worth nothing now.
All that mass crap building has left USA in a mess. Does NZ have to wander knowingly into every single OECD pothole? Couldn't we avoid at least one?
Sorry to burst the bubble, but cheap developments are not the answer.

heresy :-)

And I must respectfully disagree with you on this point, most stringently. Large developments may have had a wealth effect in the post-war years, but were not the cause, and in the long term analysis, the tailwind turns into a headwind and the returns on such investments has been diminishing for some time now. The evolution process has been speeding up over the years since Levitt first designed assembly line housing. It can take less than a decade, in current times, for a development to devolve from upper middle class suburb to ghetto housing. Examples abound. Most, but certainly not all, are found in fast growing cities such as Houston, TX, USA. It is often jarring to the eye to see what one would consider a nice development, already defunct.
In NZ, the example that comes to mind is Gulf Harbour, Whangaparoa peninsula. A ghetto in the making, mass housing built too far out on the peninsula and was in the process of degrading at the same time that units were still being completed. The end result will likely be disappointing, if not a disaster. An experiment of large scale developments, given NZ track record, would be disastrous. We still have not solved Leaky Building Syndrome, and unless we can, we should not be contemplating anything on a grander scale. Housing unaffordability is a function of low interests rates and LVR. Credit expansion has driven prices up, lots of ticky tacky houses will not solve the problem.

I find it interesting the BNZ has economists like Tony Alexander who tries to inflate the housing bubble by talking property up, and also economists like Craig who publicly worries about the consequences of doing so. In this week's BNZ overview Tony says:
But now those fears of house price falls have completely gone out the window as  four years of delayed buyers have rushed into the market to be followed, accompanied and soon perhaps (sorry young folks) led by the more cash rich investors. .....
Second, will house prices not rise because they are already very high when compared with incomes whether one undertakes an international static comparison or looks back in time in New Zealand? No. If there was to be a correction then the biggest global financial shock since the 1930s would have caused it.  

Yes strangled markets tend to be more volatile. Tony A clearly hasn't done his homework if he thinks markets with severely constrained supply never go bust....ahhh but Auckland is different
I tell you if China goes to shite then there is gonna be a nasty surprise around the corner for Akld

and yet its done exactly what you say NZ should do, build effect its subsituted productive GDP ie making toys/goods for building empty cities....and still prices have gone crazy...and now look to collapse.

SimonP...I agree with your point...the economic opinion coming out of BNZ is a bit inconsistent..I can tell you that the BNZ is not as organised as some think...I worked there for a bit on a major project and it was extremely chaotic - shambles actually.

Yes the views coming from Ebert and Alexander have often been a bit at odds. Ebert seems more balanced and more concerned about the greater good, Alexander often comes across as the king housing spruiker 

The current market driver is not interest rates but insurance cash percolating throughout the country.
The OCR would need to be raised to crippling levels to halt the coming boom.

No I do not think so Chris.

The broken window is probably broken parable when you use it to look at an economy in the way you are trying to, ie just NZ.
a) The insurance money is re-insurance payouts so in effect the money is brought in from outside the system (NZ).  So sure the global economy doesnt benefit....I can on the surface at least, accept that.
b) but NZ or at some sectors of NZ will. It will  have the same effect as NZ Govn issuing bonds, an uptick in money moving around which helps a liquidity trap such spending helps and is probably not inflationary overall...
c) You can probably break this down again......sure money wont be spent elsewhere in NZ if its spent in Chch.  Now whether that will compenstae for the other losses is a big Q, I suspect not.  Personally I like Chch is fried.....if there is another big shake and huge damage and cost I think it will be bye bye re-insurance.....bye bye chch.

The broken window is probably broken parable when you use it to look at an economy in the way you are trying to, ie just NZ.
a) The insurance money is re-insurance payouts so in effect the money is brought in from outside the system (NZ).  So sure the global economy doesnt benefit....I can on the surface at least, accept that.
b) but NZ or at some sectors of NZ will. It will  have the same effect as NZ Govn issuing bonds, an uptick in money moving around which helps a liquidity trap such spending helps and is probably not inflationary overall...
c) You can probably break this down again......sure money wont be spent elsewhere in NZ if its spent in Chch.  Now whether that will compenstae for the other losses is a big Q, I suspect not.  Personally I like Chch is fried.....if there is another big shake and huge damage and cost I think it will be bye bye re-insurance.....bye bye chch.

The OCR would need to be raised to crippling levels to halt the coming boom
Disagree. I think a raise of 1% would halt the "coming boom". But we are unlikely to see much rises at all in the next couple of years, so it's kind of a moot point.
A significant slowdown in China - and further resulting slowdown in Aus - would do the job of halting the boom too.
Whilst unemployment is "only" around 8% in Auckland house prices might be OK. If it gets to 10-11% plus - as it could well do - then house prices are in trouble, because then you start seeing more "middle class" jobs being lost. 
This time next year I think we'll reach 10% unemployment in Auckland, as another year of graduates struggle to find work, and more retail / construction jobs are shed

Yep. One does tire of losers.
Ones who spend 20,000 hours (were you diagosed you A.D.D?) studying deckchairs, then - on the basis that your efforts couldn't possibly have been in vain - choose toingnore the sinking. Even when it's pointed out to you, you choose to denigrate the speakers-out, rather than ascertain the facts.
At one of these stages, then:

Do you think we should observe what actually happens in Canada before calling time on their particular policy choice?
Also, how many of your Australian links are based on the NHSC data?

Oh, do you have an estimate for how much the NHSC analysis overstates the 'massive supply shortage in Sydney' which is 'nowhere near the undersupply of the other Australian markets'. The Census figures indicate about an 11.5% overstatement of the number of households in the NHSC analysis.
In fact if Morgan Stanleys corrections are to be believed, Australia has an oversupply problem.
Doesn't that undermine your argument, that Australia needs more houses? The confidence margin of the figures certainly appears to be much larger than the actual over or undersupply problem in this case.

quick sell your house before it falls 25%. these guys from the bank are never wrong.

Usually they don't advocate  a lowering of values, though.

maybe they have decided that its not credible to ignore the 100% over-value so have come up with this strategy......also vested interests...they have long followed the OCR as a way to deflect the blame for their charging to the they are saying its not something they can follow down......
I wonder how long it will be before life insurance for bankers and them paying for security attendants will be essential....its really surprises me we havent seen a few lynchings.

It sure popped in Spain...............

Don't blame the guy ...... the voters of France are getting exactly what they chose !
.... as indeed the Greeks have .
And even jolly little NZ .....
...... please don't drink & vote !

What does '; artificially low interest rates; mean and does it apply when interest rates are high if so then questions need to be asked about the term ARTIFICIALLY.

It’s a very uncomfortable position for the RBNZ to have put itself in, with its 2.50% OCR.
But might a re-bubbling local housing market force the Bank’s hand before any supposedly inevitable collapse in the global economy?
So......there we have admission from a bank economist that the RBNZ are trapped in their own bubble and refuse to admit or do anything to responsibly pop it for the country's greater economic good. They (RBNZ) will continue ruining our export profits with an overpriced NZD and savers/potential real investors will continue subsidizing the excessive borrowers who now drive the 'road to nowhere but debt' economy. 

Jezzz, if they can't spot the market movements with all the available data at hand even for the  street level economist then they should quit now. By 2003 it was clear what needed to be done post 9/11 (2001) and they didn't until about 2007 i believe. 
The most critical thing about OCR movements is the 'timing', and that involves foresight, integrity, and of course INDEPENDENCE. The RBNZ has none of these things 

The OCR may not be the perfect tool granted but few things in life are perfect; just pull the lever up now (a little to start and then more to signal the trend is serious). Add some sensible L:Vrules and get this destructive financial disease under control. It can be done, look at the graph how Don Brash nailed the late 90's spike with double digit retail lending rates; then Bollard let it(house price) get wildly out of control to this day. This is not just an economic imperative, all manner of negative social consequences flow from this. I know the low dollar lobbyists don't like this message but tough; it is past time for the "greatest good for the greatest number".

Actually the first post on this thread sums up the situation as there is a balanced market these days, except for Auckland and Christchurch, and prices in much of the country are and will be be fairly stable.  And it's nonsense to say prices in most places haven't come back from the peak in 2007- whereas the prices in Australia carried on going up and up during 2008,2009, 2010, this was NOT the case in NZ. One variable in the supply side of the equation will be the leaky home situation, sounds as if it may be a factor in cities like Tauranga which could put a premium on non-affected properties.

Re: Alex Tarrant article a few weeks back.
the fact is with the Toris in charge and their vested interests in property this country will continue to feed the greedy asset rich speculators. Mr Key reminds me of the Richie Rich cartoon....
I appreciate the comment by KiwiDave re: 50k in savings and 80% LVR to buy an affordable home. My partner and i managed this after years working in the UK. The problem is KiwiDave most Kiwis earn less than 60K a year and throw in a couple of kids it would take you at least 20 years to save that money for a deposit.... as for our children's chances of ever owning property???!! it doesn't bear thinking about.....

" Tories " , with an " e " ......
Toris is " The Outer Rim Infonet Service " ...... they assist Star Wars fans in upgrading and customizing their online games ......
..... mind you , the current government is a little " spaced " , ..... far out .......

So what, the above poster missed out an "e" and Steven also got ridiculed for a 'teh',
Was the cave you hibernated in full of jewels? Because you seem very precious.
Stick a torch up there and see if it reflects anything.

N.S.O.H. my friend ! ........ aha ha ha de haaaaaaaaaaaaaaaaaaa
........ viva la Toris de Hickey .....

Now the appropriate thread because the bubble is Bernard's problem not the older generation who upset him because they have pension rights, if they live past 65!
Today in the Herald Bernard trots out his 'rebuttal' to the BB comments aimed at his belief that they are the cause of the problems facing gen X and Y. His entire argument stands on the high cost of housing for X and Ys.
What he fails to see...and therefore fails to the real reason for the bubble existing in the first place. Bernard would do better to look at the role of the banks in NZ and of the govts and the RBNZ over the last two plus decades....indeed since the time the great credit based splurge began.
Yes the oldies today took advantage of the easy credit pumped into the economy by the banks with the full support of the useless and gutless govts...let's forget about the RBNZ because they are just an arm of govt. To that extent he can blame the BBs of today but only to that extent.
Now I will sit back and wait for Bernard to rebutt my point...or to embark on a mission to bring to the attention of the public, the dirty little banking/govt secret that in my opinion holds the key to the economic disease that is stuffing this country.
Why should all Kiwi have to accept that banks have a right to create and sell credit with the full support of gutless politicians, into an economy already saturated with debt, for the sole aim of keeping bubble property prices intact to protect bank balance sheets and bank bosses bonuses, with fat profits every year sent to Australia?...answer that Bernard! 

For once I have to agree with Wolly, the finger should be pointed at banks, the RBNZ, and governments rather than the baby boomers themselves. The BBs are simply responding to incentives and mob behaviour.
Bill English was just on TV3 answering questions at the Nat Party conference. Someone asked him the very good question about whether we should adopt Canadian limits on lending. His response was that we didn't need to because there is little new growth in lending and because the Government had guaranteed the banks we have to be careful that they remain profitable. My interpretation of that answer is "We don't want to prick the bubble".

Food for thought. The German govt invested in low cost housing for young working families some 7-8 years ago. Friends (in their 60's) who live down the road thought this was a wonderful idea (even though they lost a few acres of park-type land) as it brought in a new generation to the community. 
Suddenly dozens of young couples with children could own their home without breaking the bank.
Perhaps Christchurch would benefit from something similar - that is if they avoid using Prop. Developers..... and other profiteers.

Banks must be shaking in their boots at the prospect of more houses to sell mortgages on.

Bankers are the modern gangsters, the pm was a banker, therefore .....?

Gosh, by the sounds of some posts here, it seems bankers are the new Jews. Hang on wasn't there a Jewish financial cartel that controlled the international banking system?

..... I don't know about finance , but the Jews do dominate the world in the provision of moils .... and that nice little earner should be snipped off , nip it in the bud .....

They won't 'learn' diddly-squat, because they're on the wrong page.
As are a lot of folk.
Mortgage rates WILL trend to zero, and if finance continues fitting depleted resource-supply, will have to trend below zero.
That doesn't help with paying back the principal, though. Incomes have to dwindle, so inflation or default are the only options.
Guess who will be last cab off the rank, pennydroppingwise?

Now you're getting it, Hugh.
Grim jobs situation.
Meaning:  Grim income situation.
See your problem? Your precious incomes are totally dependent on your housing. Your housing is made of 'bits of the planet', using a finite energy source. Thus, at some point your incomes were going to be curtailed.
You should have seen it coming a long time ago: the push to privatise communally-owned assets, the pushes to monopolise the right to do things, the need to encroach further (and then further?) onto public land and sea area, all bespoke a limited sphere of operations.
Some are smart enough to plot the graph. Others just chant mantra.