Reserve Bank fires warning shot across bows of rising housing market; says flat interest rate projections may be 'revisited'

Reserve Bank fires warning shot across bows of rising housing market; says flat interest rate projections may be 'revisited'

By David Hargreaves

The Reserve Bank has broadly hinted that it might look at raising interest rates earlier if the housing market continues to rise sharply.

In a to speech to the Employers and Manufacturers Association in Auckland RBNZ deputy governor Grant Spencer delivered the central bank's strongest warning so far on the quickly rising housing market. Avoiding another costly housing boom was critical for economic and financial stability he said.

If the rising house prices and current credit expansion began to fuel excessive consumption spending and inflationary pressures, a "monetary policy response" would become more likely.

"The Reserve Bank’s flat interest rate outlook in our recent Monetary Policy Statement [MPS] would need to be revisited."

In that March MPS the RBNZ said there would be no change on official interest rates this year. Based on this, most economists have been picking the first increase in interest rates to occur at the end of the first quarter of next year. However, today's comments are likely to have economists reviewing the timing of the first moves back possibly before the end of this year.

Spencer said the need to avoid a housing boom was particularly the case at a time when the economy faced headwinds from an overvalued exchange rate, drought and a substantial programme of fiscal consolidation.

He also warned about the potential impact of a sharp fall in house prices on the country's banks. Others have issued similar warnings, including international credit ratings agency Standard & Poor's.

"The trend in the banking system since the [global financial crisis - GFC] has also been one of deleveraging and general risk reduction. Problem loans are reduced and stronger capital and liquidity buffers are in place. This trend has been a key theme of our Financial Stability Reports in recent years.

"But if households become more stretched financially, then the banks’ balance sheets will also become more risky. That is the prospect we now face as a result of debt levels rising faster than incomes and the increased proportion of high LVR lending that has been evident since early 2012."

He said the bank's projections in the March MPS suggested that household spending would generally pick up in line with stronger incomes.

"We assume that the boost to spending arising from perceived increases in housing wealth will not be pronounced and that housing market activity does not encourage a rise in speculative investment that could extend house price pressures to the rest of the country. So while new home owners will continue to take on new debt, we assume that existing home owners will continue to conserve or increase the equity in their properties, rather than seeking to ‘gear up’ existing housing assets.

"There is a risk of course that our assumptions turn out to be wrong: that the housing market continues to gather momentum and that households return to their pre-GFC ways of borrowing and spending in excess of incomes.

"The recent fourth quarter GDP numbers, which showed expenditure GDP growth of 1.4% and private consumption growth of 1.6% over the quarter, remind us that this alternative outlook for household behaviour is a real risk."


Spencer said current housing market pressures were centred in Christchurch and Auckland where significant supply shortages were apparent, for quite different reasons. In Christchurch the imbalance was being addressed through a major four to six year rebuilding programme, funded largely by Government and the insurance sector.

In Auckland the housing imbalance was more complex and uncertain. Figures out last week showed the Auckland market is roaring ahead.

"There are clearly supply constraints and high costs of development that need to be worked on over the medium to long-term," Spencer said.

"However, there are also escalating demand pressures in the Auckland market, particularly arising from low interest rates and an easier supply of credit. It is important that these pressures moderate in order to avoid a destabilising overshooting of house prices while additional supply is gradually brought on stream."

Spencer said the housing market was important to New Zealanders, from an economic, financial and emotional perspective. It was also highly relevant for the Reserve Bank’s monetary and financial stability policies.

High debt

On average, the gearing of New Zealand households is relatively low, but a growing number of households have high levels of debt with interest payments consuming a large portion of their income. As well as leaving households vulnerable, this could also put pressure on banks’ balance sheets.

Easy credit conditions and rising house prices have prompted more people to buy homes, and with construction still at a slow pace, this has contributed to excess demand and added house price pressures, Mr Spencer said.

“We are left with concerns that the current escalation of house prices is increasing risk in the New Zealand financial system by increasing both the probability and potential effect of a significant downward house price adjustment that could result from a future economic or financial shock.”

Spencer said that unlike many other countries, New Zealand did not experience a major house price correction during the global financial crisis and the median house price is now 12 percent above its end - 2007 level.

"This has left us with house prices that are already high relative to international norms. For example, in a recent international study of housing affordability , median New Zealand house prices (relative to disposable incomes) were the third highest amongst comparable countries.

Downward correction

"The more that house prices continue to overshoot their long-run sustainable levels, the greater the prospect of an eventual significant downward correction.

"We have seen in those countries most affected by the GFC the significant damage that can result from sharp declines in house prices, both in terms of financial system losses and the economic stresses placed on borrowers. The impact of such an adjustment could be worsened by existing economic headwinds in the form of an overvalued exchange rate, drought affected agriculture and the government’s significant fiscal consolidation.

"We are not the only ones concerned. This view of increasing housing risk in the New Zealand financial system is shared by the International Monetary Fund in their recent ‘Article IV’ assessment  and was voiced during the recent OECD mission to New Zealand. It is also shared by Moody’s and Standard and Poor’s in their most recent risk assessments of the New Zealand banking system."

Spencer said an important medium to long-term policy response was to work on alleviating the housing supply constraints, particularly in Auckland.

Freeing up land

"That means freeing up land for subdivisions and also reducing the time and cost barriers faced by developers. As recommended by the Productivity Commission, there is also a need to promote/facilitate productivity improvements in the building sector itself, in order to bring unit costs more into line with international norms. "

Spencer said  in the short-to medium-term, the RBNZ wanted to ensure that the banking system was adequately capitalised for the risks associated with mortgage lending, and also avoid demand pressures that can create a destabilising overshoot of house prices while additional supply is gradually brought on stream.

The central bank is currently finalising development of macro-prudential tools for introduction later this year. Spencer said these may help to rein in credit supply decisions by banks and moderate credit demand from households. But these tools are not as powerful as monetary policy.

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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Naughty housing market. You must stop going up, we insist ...  and by the way supply is not allowed to be increased by making Unitary Plan operative any time soon either.

Couldn't agree more.  For the first time in Auckland councils history they have a plan that's worth while and we're going to wait 3 years for...  what exactly?  Any objections can be made and discussed in six months; three years is an absurd amount of time to have a "discussion". 

Relax Kimy, interest rates won't go up. But then if you really took the time to understand why then you might not relax, especially if leveraged up to the hilt in property investments.

Relax Kimy.  National won't raise interest rates, not yet at least, they can't afford the adverse effect on the NZD.  The only way we'll get recklass monetary policy is if Scarfie's far-left nut jobs at the Greens get into power. 

That is really a pretty dopey comment Happy. If you follow my reasoning then you would know I don't advocate the Greens over any other political party. But then you probably vote, a completely irrelevant exercise. You are wayyy off the mark my friend and don't do your credibility any good.

Printing money is just rearranging deck chairs Kimy, a more holistic approach is required to fix a system that is almost broken. Did you watch that Exponential Factor video I linked you?

Brains hanging out! That's dramatic language, Kimy!
Based on your discussion last Thursday on Thursday's Top Ten, in which Kate, PDK, and Scarfie said some pointed things, are you worried about being caught on the hop with rising interest rates while over-leveraged with your real estate investments? I can understand that.
Personally, I don't have any debt, so I wouldn't mind seeing them go up, so that I can earn a better return on my investments. Interest rates are at historic lows, after all. However, the "quiet savers" don't get much publicity these days, so I guess mine is not a popular viewpoint.
All the best,

looks like the Reserve Bank will have to play its hand.... lay its' cards on the table.
I think they are bluffing...
I think a really high exchange rate has made them gun shy.... 
They will blow hard with rhetoric.... and they they will finally do something.... when it is toooo late....
Anyway... the horse has already bolted in regards to Auckland Real Estate.
Visionary L:eadership would have done something 4 yrs ago...  when the Building sector was in a deep depression and it was already clear we had housing supply problems in Auckland.
All the Reserve bank can really do is.... huff and puff

Very true Roelof. When the government let the residential construction sector colapse with thousands exiting the workforce, and most youth doing trades course going unemployed despite projections of a major housing shortage they sowed the seeds of the mess we are in now, Is there a quick fix. No chance!

GST registered businesses only pay net tax; so if they spend more purchasing input materials than they sell output-products, they get a refund by courtesy of the tax-payer!.
How will this bankrupt anybody?

Spot...on Roelof.....he'll now be remembered as piss and wind Wheeler......not for his drinking exploits either. 

Wheeler calls on the Jawbone. Go Wheeler. The RBNZ and one other Central Bank are both caught in the same trap. The deadly embrace of low interest rates and a rising dollar. Nowhere to turn other than to flap the gums. Well, they got themselves into that situation by their own hands. Good example being the 50 basis points reduction (ostensibly) to cushion the effect of the ChCh quakes. Re-insurance money has arrived. ChCh property prices now above pre-quake levels? Interest rate cut still in place. 50 bps below that other bank.

hahaha...raise interest rates......hahahaha.....
Good luck to them on that.

Exactly! My reaction too!!

Higher interest rates are good for investors.
More people will have to rent putting more pressure on an already over stressed rental market.
Unintended consequences is something economists never seem to factor into their predictions.

With the amount of debt around and low rates worldwide the RBNZ will be causing more damage than it's a bluff.

Interest rates are not going to be raised anytime soon.  Rhetoric only.
Maybe address foreign buyers who may not even live in NZ who pressure up house prices. And immigrants pouring into Auckland only.
In any case, outside of Aucklands' nicer suburbs - there is no house price boom. Prices are pretty flat across the country.
NZ's interest rates are already, on a global relativity basis, very very high.   You can finance a car cheaper in the USA than a house in NZ.   USA / UK, HK, Taiwan, Japan, Singapore  -   mortgages at 1% to 3%.   NZ mortgages sky-high at 5-7% .    Blame the hot $$$ sloshing into NZ from offshore not kiwis trying to finance their own dwelling.

 Blame the hot $$$ sloshing into NZ from offshore not kiwis trying to finance their own dwelling.
Pardon me Mortgagebelt......but that is exactly what we have been doing... and no less expecting the RBNZ Governor to arrive at the same conclusion........thus formulating ideas to discourage  such  blatant averice.

"The more that house prices continue to overshoot their long-run sustainable levels, the greater the prospect of an eventual significant downward correction."
Exactly, and well supported by historic evidence. That's something the property bulls seem to ignore.
So they may be laughing all the way to the bank now, but that smugness may be wiped off their faces.....time will tell....

It's a matter of keeping the so called irrational exuberance in check.
I'm quite bored with it all actually - not enough risk - everything continues to play into the hands of property investors.

Too many 'new normals' have been used.  Now Idiocy is the new normal.

 Now Idiocy is the new normal.
Nah. Idiocy has been pretty standard at a number of NZ institutions for the last 20 to 30 years

This is becoming the 'new idiocy' thats not bad - might use it.

Interesting, innit, that the ducks are starting to get all lined up:  way I see it anyways.
Duck #1:  Wheeler quotes Productivity Commish on housing market woes, extensively:

  • low productivity and lack of scale
  • materials duopoly
  • land price is simply horribly wrong:  combination of MUL multiples, local government greed in socking 'greedy developers' for everything they can (to keep it out of the third-rail; 'rates' bucket), land banking, and instanmt transmission of all of this price inflation into the land component of existing house sales (the bit most common taters miss....).

Duck #2:  Wheeler open-mouth operations re macro-prudential controls:  translation for those who have not yet caught up:  we're gonna make you hurt big if you keep pumping credit into what is clearly a local (Auckland and some other parts) bubble.
Duck #3:  The Gumnut is (via DIA) in the midst of the first-ever review of Development Contributions:  expect some surprises out of this one.
Duck #4:  The Purpose of Local Gumnut was comprehensively re-stated in the late 2012 LG Amendment Act.  The Four Wellbeings are 86'ed, and a 'service delivery' expectation is set.  None of this has yet been a) absorbed by Local Gumnut in terms of behaviours or b) tested in any way.  Expect a public flogging or two before election time, to show the economically clueless Local Gumnut denizens who's boss 'round 'ere.  Before that, expect some fun and games as the Long Term Plans get their annual airing...
Just sayin'.

Yeah good one - increase interest rates and we end up with $1NZD = $1USD

yeah...quite sick of it...don't need to raise interest rates, the solutions are very simple with even a smidgeon of political will:
- fast track Unitary Plan
- change non-resident property investment rules
- build more social / affordable housing 
sick of Wheeler, govt etc pretending they care about the problem - because they don't!!!!
I guess they are just hoping / praying that this boom doesn't turn to bust. If it does, their PATHETIC inaction over the past 5 years will shame them for the rest of their lives  

Fast tracking the unitary plan looks to be nigh on impossible Matt. Even on the current slow track the train has to stop for ages at every station. Over 400 turned out at a meeting in Milford last week , sounding 100% vehemently opposed to key elements of the plan, especially densification and high rise. Last night about 500 very anti folk fronted up in St Heliers. It is also happening in South and West Auckland.
Think also of the employment ramifications if the plan could be started forwith, ploughing ahead simultaneous with the Christchurch rebuild. We would go to early '70's unemployment levels within a year with a nationwide labour shortage. You could find your services valued so much higher than when you left for Aus you get tempted to rent out your new place and head back home.
Agree with you re non-resident investment but suspect it is not as big a driver of prices as is generally perceived.

The opposition to the unitary plan is not surprising. Was always ambitious and I suspect the council know it. They will need to pull back a bit on intensification and do a bit more Greenfield

500 very anti elderly folk who want everything to stay exactly as it is for their last few years.
They all get het up at public meetings without any understanding of the plan, probably assisted by council staff who don't know much about it either. The reality, if you actually read it, is that nothing would change in the Apartment/Terrace zone 'till long after they're dead and gone.
Meanwhile the Single house and Mixed housing zone rules alone would help the affordable housing issue (1 house in 20 taking advantage of the granny flat rule = 20,000 new dwellings instantly)

If this govt had any balls it would pass the Unitary Plan into law immediately! But in reality the vested interests do not want to see additional supply of housing - keep limiting supply and prices go up - the near retired and already retired grey heads in St Heliers want to keep the values up too it would appear!

The words written above show some interesting biases. Do you have vested interests? If not, then why the rush? All the more reason to resist any change whilst people are trying to ram it through without proper consultation. Shock horror, people who have invested, often their life savings, in an area want time to understand what is being proposed and have their voice heard. It's called Democracy and all are entitled to that no matter what their age. 

I really don't see how the RBNZ can have any possibility of raising rates when considering what they're up against:
Bernanke printing billions by the month, Japan now doing the same, NZ already has among the highest interest rates in the developed world which is bloating our exchange rate. Hence possible Tiwai Point closure and yet more export jobs being lost.
What sort of impact would dollar parity have on our dairy industry?
The list goes on.

MikeM, exactly.......I like the "pissing in the wind" comment above.
Currency is being competitively devalued worlwide.....QE is ramping up, not down. All this talk of exit strategy is hot air.
Come on is up and actually raise interest rates.....I dare you......

What many people don't seem to understand is that the reason that the house market burst in many countries in the past 5 years, most notably but not restrcited to the US, is that interest rates were kept too low for too longi.e. central banks such as the Fed never raised rates back to any extent from where they originally cut them over the previous couplemof decades - they fueled the bubble and the burst
So the RBNZ has many prime examples of what not to do if you want a house bubble to burst i.e. leave rates too low for too long. If you think the RBNZ hasn't taken no notice of that you have rocks in your head. Many, such as Mortgage Belt, don't realise that although yes higher rates will hurt many immediately, and major furtehr extended delays in rate hikes could eventually result in a US style 35-40% fall in house prices which the RBNZ will be responsible for - I doubt Wheeler wants that on his epitaph 

Kimy, you're actually making my point. Brash has since publically admitted that he was too slow in raising rates back in thr early 2000's, and that was also certainly the case with Bollard. The issue isn't whether rates go up, as they eventually have to, its almost solely a case of the timing as to when they do. Bollard was slow because the RBNZ did not initially think the housing boom of 2003-07 would turn into one, and be inflationary. As a consequence of letting it get well establ;ished, he had to take the OCR to 8.25%(bank bill to 9.30%) to get it under control, with the GFC having an impact as well. He should never have had to take it to those levels if he had better anticpated, and what I'm suggesting is that Wheeler has two fine examples to refer to, and from what he's been indicating since being in the job (and Spencer reiterated last night) I don't see them making a third mistake in a row.

Kimy, says alot about Kiwis doesnt it. 
Higher interest rates = rich Japanese housewives (i.e. investors)
Higher interest rates = poorer average NZ (i.e. perinenial borrowers)
and low interest rates won't change that  ?
I'll add another one:
Low interest rates = devastated NZ pensioners living on fixed interest (but who cares about the massively growing group over the next decade ?)

Yes, effective interest rates do need to come down (our dollar is still climbing from speculators and easy Buy positions putting excess funds into NZ)
Mist, got any number source  to confirm that claim?

Stop making up stories to fit your limited view.
The New Zealand banking system has a significantly higher loan-to-deposit ratio than any other country in the Asia-Pacific, credit rating agency Moody's Investors Service says.
A chart in Moody's Asia Pacific Banking Outlook 2013 report shows the loan-to-deposit ratio for New Zealand above 140%, well ahead of second placed Australia's, which is just above 120%. Of the 14 countries surveyed Hong Kong comes lowest at about 70%. (See chart below). Read article
We borrow offshore because we are broke and greedy together.
Moody’s said the government’s fiscal and debt positions were very strong, and any threats from the nation’s high level of private debt was mitigated by the fact that the majority of those liabilities are held by the nation’s Australian-owned banks.
Still, New Zealand’s total external liabilities equalling 159% of gross domestic product is the nation’s biggest vulnerability, and prompted downgrades by rival rating agencies Standard & Poor’s and Fitch Ratings at the end of September. Read article

Stephen Hulmes, the numbers are grossly inaccurate because our very clever Australian owned banks are reporting foreign and non resident cash deposits in the bank earning high NZ interest and paying zero tax as Foreign debt so they do not appear as deposits in the bank.
Kimy, since you apparently have access to this type of co-mingling information, maybe you can share it with us and state the position of individual banks to help unsecured depositors protect there savings from the deceit you so clearly identify.

Grant this is of course your opinion, hence its quite inderstandable ppl dont know how you think. I suggest that low interst rates are a symptom and not a (direct anyway) major cause. For instance when I bought in 97 the rates were "reasonable" (7%) take say 2005~6~7 floating was prices were still rocketing.
So I'd suggest that a greatly eased credit situation like LVRs went from 80% to 95% and the collective madness of making profit for no work have been far more importtant factors.  Now Im sure that as ppl see low interest rates are here to stay then they have had the conficence to take on big LVRs.
and this is where we really differ....Im sure Wheeler doesnt want the bubble to burst, no one would.  However with so many other parts of the NZ economy either contracting or under a lot of pressure raising rates can sure be a way to pop these areas first followed by the housing market.  So Wheeler using raising rates to cool housing doesnt seem the way to go, he'll surely be looking at other methods....I hope.

I am reading Anti-Fragile by Nassim Nicholas Taleb at the moment and it has some interesting points on this. (As an aside: I would recommend the book; the writing is a bit unwieldy but it does at least make you think about systems in a new way)
Those economies that have not experienced continued shocks become more fragile. The longer something is held stable (e.g. by too low interest rates), the more likely that when a shock comes, it will be large and unexpected. Conversely, a constantly and randomly stressed system will adapt and grow stronger over time so that when a shock comes, it is smaller and more easily absorbed.

Yes, I love taleb's work. As he points out systems will optimise, if there are no differing draws / impacts on the system it will optimise itself to function best where there is the  return and butress itself against the impacts. This means less resiliance to those impacts if they occur it grown the wrong way..there is no structure to support the change....such things take time.
So the Q is when...and how bad...

Hi Grant, a piece outlining the opposite to what your thoughts are,
"the latest incarnation of sado-monetarism, the urge to raise rates even in a deeply depressed economy. It’s a long lineage, going back at least to Schumpeter’s warning that easy money would leave “part of the work of depressions undone” and Hayek’s inveighing against the “creation of artificial demand”. Nothing must be done to alleviate the pain!"
So you see those not of the Hayek / austrian line of um thought are opposite...and indeed when you start to look at the evidence of a direct link to low interest rates, well it doesnt appear in the charts/data.

The only thing making it harder for kiwis to purchase, like raising interest rates or an LVR, is going to do, is to make it even easier for non-resident foreigners to buy up housing here. Any measures taken to cool the market for kiwis without doing the same where foreigners concerned is cynical to the highest degree.
Address ALL of the issues making housing unaffordable for NZers, not just peck around the edges

Spencer said that unlike many other countries, New Zealand did not experience a major house price correction during the global financial crisis and the median house price is now 12 percent above its end - 2007 level.
"This has left us with house prices that are already high relative to international norms. For example, in a recent international study of housing affordability , median New Zealand house prices (relative to disposable incomes) were the third highest amongst comparable countries.
And for all those who knocked and have critised the Doomstyers, BH and others,  back then and since....
The fundimentals and time are now showing who was and is correct., even being reconised by the RB now.

Bring on a 20% house price crash.
Then watch interest rates fall to where they should be as banks scramble to save their assets and customers.

Wow. Surprising comment from you Mr M Belt. Powers-that-be know what is coming to NZ, so cannot drop our rates until it begins.  So yeah, bring it on. If it's inevitable, any time delaying is just a waste.

So 25%+ un-employment?  or higher income taxes at 70% seems OK to you?  Pensions lost all over?  Younger ppl with 95% LVRs so far under water that they will never get out?   If it hits I think its going to be a mega event no ifs no buts....

Edit: We are at the point where every bubble blown worldwide is in danger of simultaneous collapse, maybe starting with EU, or Japan, or something in Korea, or all of it together. In the bigger picture, this is simply a numbers game in that, if more people stand to gain from a reset then it is inevitable given time. I remember being in US during the awful Bush years thinking, how can these people, pretty much all of them, follow this dimwit so blindly, such was the power GOP enjoyed at the time. Look at them now. Pitiful. Brought to their knees by demographics, social change and that pesky thing called reality. The state the world economy will evolve according to reality too, eventually. What we will see going forward, IMO will be similar to political change witnessed in US recently.
EG: Who would have thunk say 10 years ago, that parts of the USA would be amongst first in western world to legalise pot. Reality 1, Previous status quo 0.

Why only 20%? 
If you look to price to salary with 3 to 1 being the norm we are something like 6 to 1.  That suggests alone a 50% drop and of course an undershoot. 
Then throw in a few other things like a second Global Greater  Depression caused by a levle of debt un-seen before (it even exceeds the 1930s depression) and 75% down seems un-crazy.

Using house price / Income ratio might be ok to help determine affordability... BUT...
I don't really think it is meaningful as a way to determine Values.. .. It doesn't really suggest anything .
in the "Global World"...  with the squeeze on the middle class there is a disconnect between prices and incomes
So...  calling 50-70% down based on that ....   does seem crazy..  :)

"If the rising house prices and current credit expansion began to fuel excessive consumption spending and inflationary pressures, a "monetary policy response" would become more likely."
Always got to read between the lines, they're saying that house prices can keep going up as long as we don't start buying baches on second mortgages and a new car on the credit card.  A phased introduction of LVR controls is also likely.
They can't and wont touch interest rates, at least not for another year or so.  The effect on the NZD would put unacceptable pressure on the export sector.

Too little too late! Another years of solid house price appreciation. Bigger risks of boom and bust. Bigger risks of the tax payer bailing out the banks. People stuck in a life long debt of heavy mortgage repayments with no money to spend in the real economy. Wages not keeping up with the cost of living , how does Joe bloggs afford to live scrap together enough for a tin of bake beans.  New Zealand rolling along nicely at the present moment, but when the tide turns from an overseas event will we be left vulnerable and exposed ? Will there be a large sucking sound ?

Compulsory superannuation. No thanks. I will choose where my money goes. Right now I choose to rent rather than buy as it's cheaper. I also choose to save and invest 40% of my income into interest-bearing assets (not property) so I don't have to wait to age 65 to draw my pension.

The price may still drop 75% which means only those currently with 25% or less of the value mortgaged (low LVR) would not be underwater

Sorry but that is way off the mark.
Those with little or no debt will hang on to their properties when there is downward pressure on prices.
Those with high debt relative to values will either keep paying their mortgages and remain in their home or, if they lose their job then the bank will take possession and do nothing until they see the market recovering. I've seen banks sitting on stock all around my neighbourhood for the last few years and only recently have they been moving it.
There is too much vested interest for the type of correction folks on here are talking about ... barring economic armogedden in which case we will all have a lot more to talk about than house prices.

"barring economic armogedden" ie a second Great(er) Depression, which is what Im talking about when I say 75% drop in house prices, it wont happen in isolation.   The thing is debt and leverage and the imperitive that debt has to keep increasing, Steve Keen and Minsky are the best reading for how that goes.
So ive talked about the share market being a dead cat bounce fueled by Fed debt, so I'd expect that to collapse as well....Vera, Gummy say not.....we get to see....not to far into the future I think....5 at most 10 years,,,,under 5 most likely. 

Not sure what you are saying here? Yes, those with no mortgage or very low such as myself would indeed be the most resiliant from this event, its a Q of level of debt and meeting the payments at least in the short term.  I would also expect that wages would take big hit, since they are "sticky", ie dont normally drop then the way they drop is by becoming un-employed and being forced to take a lower paying job.
Those with LVRs over say 80% yes will be so far into neg equity it would pay them to go bankrupt and I think they are out of that in 7 years?  not sure on that law(s) never faced it.
Those with little or no  debt sand to be the last ones standing as it just who does the council hit for rates if a decent % of houses are forclosed? well I suppose the banks short term...which will feed through into the costs of those solvent.  Ditto tax, those still earning will have to shoulder a far higher tax burden to pay the un-employment etc....

Grant Spencer delivered the central bank's strongest warning so far
Reminds me of the story about Peter and the wolf.
Peter kept crying "Wolf"
The RBNZ keeps warning and talking...

With all due respect, in which-ever amount is owed, to whomever is due; this is top notch clap-trap!
Consumption is two thirds of GDP in the OECD countries! ...but the Reverve Banksters of New Zealand do not want Kiwis to spend more...?
Yeah, right!!

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