Housing stock value tops $700 bln

Value of NZ housing stock reaches $708 billion after 10% annual rise

Property

Value of NZ housing stock reaches $708 billion after 10% annual rise

22nd Jan 14, 2:48pm by Gareth Vaughan

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

The total value of New Zealand housing stock has topped $700 billion, the Reserve Bank says.

Reserve Bank data, based on figures from Property IQ and Statistics New Zealand, shows the total value of housing stock reached $708.146 billion last September.

That's the highest it has been in a Reserve Bank series that dates back to March 1990.

The quarterly rise in value of 10.3% is the highest for any quarter since a 13.4% rise six years earlier, in September 2007. But to give broader context, it's well down on the highest annual increase, 31.2% in the December quarter of 2003.

The total value has risen during every quarter since September 2011 after falls in eight of 13 quarters between June 2008 and June 2011.

The quarterly increase was $19.3 billion, or 3%, for the three months to September 30 last year, which is the latest available data.

The Reserve Bank's "M 10 Housing" series also shows residential property investment contributed $1.819 billion, or about 4.86%, towards real Gross Domestic Product in the September quarter last year.

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16 Comments

by Kleefer | 22nd Jan 14, 4:54pm 1390362887

This is yet another sign that New Zealand's housing market is in a bubble. At $700 billion, the paper value of our housing stock is more than three times our GDP. In contrast, the housing stock of the US is only worth about 1.2 times GDP. If we took the Auckland-style 'smart growth' bubble-prone cities such as San Francisco and LA out of the equation, the other cities in the US probably have a house value to GDP ratio of less than one.

by dh | 22nd Jan 14, 10:38pm 1390383514

I think the year on year real numbers are more interesting to look at, so (just eyeballing the numbers rather than calculating them) we get housing stock up by about 64 billion or so, GDP up by 5 billion or so.

If I thought that the value of New Zealand housing was in any way connected with the New Zealand economy, I would be hard pressed to explain these figures.

by dh | 23rd Jan 14, 9:22am 1390422156

Here is the annual amount GDP has increased by plotted with the annual amount house prices have increased by since 99. To make the graph crystal clear, if you took all the extra money in the ecomony in the year and put it into house prices, that only explains the increase in house prices (blue column) up to the level of the red column.

https://www.dropbox.com/s/l4y1qqvxgsi2f07/GDPHouse.png

by kiwimm | 23rd Jan 14, 11:47am 1390430833

Excellent work dh. Good to have some real numbers rather than opinion.

by bob | 23rd Jan 14, 12:09pm 1390432145

"... Auckland-style 'smart growth' bubble-prone cities... "

Where exactly is there a smart growth rule in the operative plan? All operative Plans in Auckland region are still based on suburban monozoning. Unitary Plan brings in even more regulation and restrictions.

by Boatman | 22nd Jan 14, 5:08pm 1390363736

Is this what some people call unearned income?

by powerdownkiwi | 23rd Jan 14, 8:00am 1390417252

DavidChaston put up the graph the other day, which explains the need for this. It comes from page 16 of the BP 'Energy Outlook', published 2014.

The exponential rise of 'GDP' is essentially an indication of the collective expectation of 'ability to buy'.

The energy graph is essentially an indication of what is available to be bought.

Even doubling the slope of the energy line - via efficiencies, say - doesn't solve the divergence.

So it had to manifest in inflated 'values' of something existing. Housing is the biggest game around, and even the biggest game can't resolve the gap.

There WILL be a major 'correction'.

by rastus1 | 23rd Jan 14, 8:34am 1390419275

You gotta laugh at the term 'value'. Should be called the NZ Stupidity Index.

by dh | 23rd Jan 14, 9:47am 1390423639

To be fair Hugh, this is a fairly typical report of a Press/ News release rather than an investigative/editorial piece.

by Your Landlord | 23rd Jan 14, 10:23am 1390425791

Pleasing to see the increase in value of the industry I am invested in.

Helps make all investors feel very secure about their futures.

by Chairman Moa | 23rd Jan 14, 1:14pm 1390436071

I recalled while ago on Australia SBS Economic news; Banks around in China are holding something like 14 trillions USD in saving from all citizens if China. So 700bln is just loose change for them.

by bob | 23rd Jan 14, 1:45pm 1390437902

$708B of housing with about $180B of mortgage debt? That's about 75% equity. So when one says that unaffordable Auckland houses costs 8 x income on average 75% of that is already owned debt free so the actual cost of the house is more like 2 x income.

I guess that's why unaffordable houses keep selling and one can live in a 10x income house without much concern about interest rates.

by scarfie | 23rd Jan 14, 3:40pm 1390444827

All very well to throw around statistics you don't understand. That $180B is about the size of the money supply. If houses ARE the money supply, how are you going to repay the debt?

by dh | 23rd Jan 14, 8:02pm 1390460532

Stirctly speaking, mortgagee sales are a function of having a house and losing access to the ability to pay off credit, so is more a function of things like the number of jobs. Houses not selling or buyers unable to buy is more an indication of buying, though the two are linked as buyers normally need credit to buy a house.

Now, ZZ, I know you believe the property market is acting in a natural and reasonable manner, and that I'm not going to change your mind about it, but surely even you would agree that if we look at the graph of the expansion of house prices compared to the expansion of the economy to pay for said house prices all the way size 1981, something pretty unusual began happening in 2002.

https://www.dropbox.com/s/dysx2iocn5npc8d/since81.png

(as a side note, adjusting the graph from nationwide to per capita doesn't really change anything).

by bob | 24th Jan 14, 4:07pm 1390532853

All very well to be patronising - which figure do you dispute?

by JB | 23rd Jan 14, 4:26pm 1390447574

ZZ - Take out the debt free houses and recalculate the debt / income / GDP ratios of those with mortgages. Your in for a fright !

It is these borrowers we should be concerned about. Their ratios are thru the roof !

Averages can hide a lot of sins.

Meanwhile evryone is HAPPY and it's election year with more giveaways looming already - Labour " freeing up " $ 1.5 B for extra giveaways. What the ...