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Home Loan Affordability Reports show people should have no trouble moving on to the second rung of the property ladder, but first home buyers will struggle in Auckland and Queenstown

Home Loan Affordability Reports show people should have no trouble moving on to the second rung of the property ladder, but first home buyers will struggle in Auckland and Queenstown

By Greg Ninness

In Auckland it is still possible for a young couple who purchased their first home five years ago to move up the property ladder and buy a more expensive home, even if one of them only works part time, according to's latest Home Loan Affordability Reports.

The reports track how affordable the mortgage payments would be for three typical couples at different stages of the property ladder in each of the major centres throughout the country:

  • A couple aged 25-29 who both work full time and are looking to buy their first home at the REINZ's lower quartile selling price.
  • A slightly older couple aged 30-34 with a young family where one works full time and the other for 20 hours a week, who would have purchased their first home five years ago at the lower quartile price at the time, and are now looking to move up the property ladder and buy their next home at the REINZ's current median selling price.
  • A couple aged 35-39 who both work full time and who purchased their first home 10 years ago at the lower quartile price at the time, and are now looking to buy their next home at the current median selling price.

It is assumed each couple earn the median rate of pay for people of their age in and the mortgage payments are considered affordable if they take up no more than 40% of their take home pay.

The reports show that housing remains affordable for all three groups except in the overheated property markets of Auckland and Queenstown.       

In Auckland, a lower quartile-priced home would be unaffordable for a couple on a median income because the mortgage payments would take up 43.6% of their take home pay, before allowing for other property related expenses such as rates, insurance and maintenance.

The rising house price effect

However moving on up to the second rung of the property ladder should still be affordable for couples who purchased their first home 5-10 year ago, because they would have benefited from a significant increase in their equity from rising house prices.

If they had purchased their first home five years ago at the REINZ's lower quartile price at the time and resold it at the current lower quartile selling price, they would have equity of $368,535 to put towards the purchase of median priced home.

Their equity comes from the increase in the value of their first home over the last five years less an allowance for agent's selling commission, plus the capital payments they would have made on their mortgage over that time.

To buy a home at the REINZ's current Auckland median price of price $825,000 they would need a mortgage $465,665 and the payments on that would be equivalent to $529.63 a week or 38.6% of their take home pay.

So moving up the property ladder would still be affordable for them, even when one partner is only working part time, although after the mortgage payments were made they'd have $842 a week to pay for everything else. So there wouldn't be much spare cash if they had a young family.

However their situation would improve significantly if/when the partner working part time returned to full time work.

For the slightly older couple aged 35-39 who purchased their first home 10 years ago and who now both work full time, moving up the property ladder would be even more affordable.

Selling their first home after 10 years would leave them with equity of $434,735, which means they'd need a mortgage of $390,265 to buy a median priced home.

Assuming the mortgage term was 30 years, their repayments would take up just 23.7% of their take home pay.

That gives the older couple plenty of options.

They could keep their mortgage payments modest and divert some of their money into savings and investments, or they could pay off their mortgage faster and then start saving in earnest for their retirement.

The reports highlight the disparity in wealth in Auckland between those who have owned their home for a number of years and have benefited from the increase in equity which rising house prices have provided, and those who are struggling to make the leap and get on to the first rung of the property ladder.


The only place facing affordability issues is Queenstown, where the problems are even worse.

The mortgage payments on a lower quartile-priced home in the resort town would suck up a whopping 48.9% of typical first home buyers' take home pay, and it's unlikely that a couple who purchased their first home there five years ago would be able to move up the property ladder and buy their next home in the town if one of them was working part time.

Even a couple who bought their first home in Queenstown 10 years ago and who both now work full time, wouldn't have a lot of cash left over if they traded up and bought a median priced home. That's because the mortgage payments would eat up 37.5% of their take home pay, which is just within affordable limits.

But outside of Auckland and Queenstown, housing remains affordable for all of the typical home buyers profiled in the Home Loan Affordability Reports, giving people outside of the two property hotspots more options when planning their financial futures.

The full suite of Home Loan Affordability Reports are available for most of the regional centres throughout the country -  click on the links below to read any of the reports:

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"Property ladder". Ladders sometimes collapse and you fall off the roof.

And sometimes ladders don't collapse. Ladders are a great tool to reach new heights both financially and to check your gutters.

$253 a week to pay off a FHB house in good old palmy. Funny all my rents I charge in Palmy are significantly higher than that. Hope my tenants don't figure out they could be saving a couple a hundred a week if they got there ass to the bank and bought something themselves. Anyone in kiwisaver would have the 25-30k deposit required for 10% in palmy too.

This is the basis of why Palmy, as a city growing at similar rates to welly and chch (20% to 2043) is so very undervalued and a screaming BUY rating remains from this commentator.

Huge student population which creates good demand for rentals. From a fundamentals point of view it is very good place to own rentals as a large percentage of the population don't want to buy as they are only going to be there for a few years and they don't have the means to buy without parental support.

I see Mission Bay had a 100% increase in the median price in the last year. Can someone please cut the grass at 102 Kohimarama Road! The multi million dollar house is still derelict. The house is rotting away and in summer the Cow Parsley is knee high.

I had a look at my local affordability report. It's interesting but I have one major quibbles.

Somehow the young couple (neither of whom have a student loan or pay Kiwisaver deductions apparently) managed to earn the 2016 median income 4 years ago and save 20% of it for those 4 years to generate $59,100 for a deposit. I suspect such admirable savings discipline is pretty damn rare amongst 25-29 year olds.

Really? I've saved 65k in 2 years, GF has saved the same.

We cannot find anything worth buying for 650k

You literally cannot save fast enough

I'd suggest that you're both a) earning much more than the median income and b) unusually disciplined in your savings.

Have you tried looking outside Auckland? I still can'take find anything for 650k on Manhattan island. Maybe we just need to realize that we don't have a right to own property in an area just because we want too.

To save $32500 in a year and 100% of your after tax wage, you would have to earn $42000 gross. So your incomes must be significantly higher than that.

Your point about not being able to save fast enough is very valid though. You are an unfortunate casualty of the lending restrictions. All they have done to you is given you are larger debt on a lesser house all in the name of 'financial security' (because you have more equity). Most people won't be able to save nearly as much as you have in that time period. They need to exempt first home buyers with good income, employment and savings history from the LVR's. $40k of genuine savings, income protection insurance and you should be able to buy. More focus on servicing ability and less on deposits and equity for FHB's.

Here's the ironic thing about saving with banks. It too serves to prop up this unhinged system. You guys have more than enough saved IF you look outside of Auckland etc

The problem with that is that their income may take a serious hit also. You may get a similar job in a smaller city but if you want to move on, your options can be far more limited. I know several people that moved out of Auckland and found good jobs elsewhere but when it came time to move on they couldn't find anything and came back to Auckland. It can work depending on your occupation but for many it isn't that easy to do.


Somebody told me once that a bubble about to burst is a bit like an elevator. The door is open, the occupants are expecting to go up, they are shouting to to the people outside the lift "hurry , hope in, there is still room." Then the door closes and they plummet to the basement.

maybe they should borrow onwards ladder

Anyone for the basement in Vancouver?

"The justificiation for Liu's fury was just as hilarious: the envoy said she has expressed qualms to some provincial ministers after receiving calls from distressed Chinese students locked in contracts to buy homes but unable to drum up the extra cash to pay the tax"

Students buying homes? How can that be?


Laughable - JK will be doing his utmost to avoid a similar call from his masters especially after getting reamed out by them already over the supposed picking on of Chinese by kiwis yesterday.

Most of these students will be graduating with a Bach of Scammology, soon the only place you can receive one will be in NZ where the hicks are getting rid of all the family silver.

The chinese are trying to clamp down on speculation in China, but sre happy to mess up everyone else's economies.

History suggests that if you wait a bit you can push the up button again and it will take you where you wanted to go.

The bit about a dual income couple 35-39 are clearly would have no kids. I also would like to stop talking about the property ladder. It's not a ladder it's a place to live. For FHB most will end up staying in their first home for quite some time as they will no be able to afford to move for many years. Moving to a higher quality or larger dwelling is costly.

2 school aged children is what they say. The average age of a first time mum is around 32 so I don't think 2 school aged children is what you would expect for a couple aged 35-36. Both parents working full time is pretty common for couples with pre school kids as well. Day care costs need to be considered too.


We've had enough and are emigrating shortly. Our economy has become perilously unbalanced and unstable. Frankly, I don't want to be local when the Antipodean Mega-Bubble pops. Seems like a catastrophe best to get some distance from, whether you own Antipodean shares/housing/bonds or not.

Here's some food for thought:
If/when house prices crash, who here thinks that recent immigrants/students/work visas will stick around to pay down the hopelessly underwater mortgages that our banks so prudently granted them? Who here thinks that they will instead skip the country (and the mortgage)? I would do the same, and so would/will anyone with the ability to jump jurisdictions and save their financial lives. Our banks are going to acquire a fair amount of housing inventory. Who's buying? Crickets.

I will watch with great interest from safety afar.

Great news. Don't slam the door on the way out.

OPR - do you mind saying where you are off to?

Yes, the flaw in the plan is that the trigger is likely to be an international scale event - in which case the safely afar wont exist.

"who here thinks that recent immigrants/students/work visas will stick around to pay down the hopelessly underwater mortgages"

Are you not making the unfounded assumption that these people actually needed mortgages?

I can't believe you want to move out of this beautiful city we call home.

I hope all of the houses the students leave behind have seaviews and great Cafes at the end of the street.

I hope the grass is greener on the other side. You can always come back in your old age.

Move up the ladder, that is a laugh. With the metrics I am seeing now with greater clarity, it is a climb towards disaster.

LIke what?

I have said it before here, look at the money supply growth (M3) vs GDP growth. They are available under tools here. Then ask yourself where the money that isn't really required for GDP is going, and by using the velocity multiplier the productive economy only needs $43B to run. So there $270B more in the circulation than required and it is looking for a home.

Please read all the reports and not just Auckland.
Believe it or not the property market is not just Auckland, but by most of the comments on here you would think that it was!
Seriously most people outside of Auckland don't really care if people are paying too much for their homes, but
are being penalised due too Aucklands issues.
Look at Christchurchs report and you will see that you can buy far better homes than Auckland have for half the expense, and is a far more liveable city.
The median price quoted though is on the light side though due to many of the "as is where is" prices that are included.
A median type home in an average suburb would be close to $500k.
Good article though Greg.

I always set aside the Christchurch figures due to the as is where is. Wellington looks affordable at 20% for the categories. TBH it is with the current interest rates and if you earn the median dual income. However problems don't arise from the median they happen in lower incomes. There are also problems when income is disrupted going from dual income to single income. Which according to the figures at 20%+ would mean the house immediately becomes unaffordable by the definition used.

The people complaining about being closed out of the housing market aren't bringing in $1600 per week in net pay. 50% of the population is earning less than that (in the age brackets used).

Keep on drinking that debt kool-aid.

Yeah and don't leverage. Just save your coins and one day you will be riiiiiiich. I would both so rich now if I didn't buy property in 2011. Oh wait.

gee I have heard this leverage tale so many times, works well on the way up, trouble is most greedy people don't see the signs and know when to pull back as the peak nears and they end up where they started or even worse.
I hope you plan well for the down cycle, even though I think we are still a couple of years away yet

It is important that people do though as it allows first home buyers to buy at the lower end of the market. The supply of houses does not match the needs of people buying. All the new houses I've seen lately have been expensive large homes. This isn't doing anything for first home buyers.

As long as the next one borrows more money than the previous one.. yes, I guess there's a "ladder".
More than "ladder" I'd call it pyramid scheme, but ok.

My plan was to take on a smaller mortgage at first and then pay it down as quickly as possible and then buy a bigger / better house. The problem is that house prices went up so much that the next step is bigger than it used to be. I would have been much better off if I had of bought a bigger house with a bigger mortgage up front.

exactly - which is why maximising your leverage is so attractive as a strategy... until the rug gets pulled.

I went to( by chance) my first Auckland auction on site last Sunday. Ellerslie , ok street , 120 sqm home, 2 at a squeeze /3 bed , no garage but space for one car offroad. On multi shared site , usable land about 220 , room to swing detailed cat in front. Newly decorated in Bunnings/spotlight decor .Majority of residents in street elderly,all living in similar homes.Would suit couple 1/ possibly2 young children , although no one resembling those traits present. Selling for a little under 1.1 million .

Based on the young couple median that'd take around 61% (rough figures) of net pay each month, and by definition would be unaffordable.

Nice bars and cafes. Close to the train station. Walk to the races. A young professional couple with a bit of help from the folks could afford.

I've been looking at Napier property lately. Napier has one of the best lifestyles in the country and housing is still reasonably affordable for first homes buyers. Rentals can still be purchased with excellent yields for investors. Auckland is reaching a housing crisis but most other parts of nz like Napier still offer good opportunities.

The property ladder works - I started that late in life, 16 years ago, and it looks great from here !! --- the ladder did not collapse and will not collapse!

It is obvious and a FACT to all those who are serious about getting on it , that it is still affordable ... Just like any LADDER , you cannot start from the middle or the Top - you need to start from the bottom if you don't have the dough.

Anyone claiming the opposite, either doesn't have a clue of what it is about, has no proper income or saving attitude so he's just jealous of people who do and can ... or just commenting for the sake of pushing a contrarian argument like a drunk in a bar who makes no sense at all ....
Almost half of properties sold in Auckland are still under 600-650K ... and Yes , that is unaffordable for a single average income -

Eco,' its obvious , its a fact, its a contrarian argument , like a drunk, clueless. Almost half the properties sold in Auckland are still under 600k.' Eco what is the median price of an Auckland home.?

It is obviously a too bigger number that you might like or can afford !... but thank you for making my point - looking for median price that the FHB cannot afford and should not BUY !! .... If that number is a $1M or $2M is beside the point .... If that was $600K and FHB could only afford 250K then it will seem HUGE ...which was the case about 10 years ago

Maybe this will help you understand: here is the word from the horse's mouth .... listen to the interview of Dr John McDermott on RNZ

Someone must have spiked the birdbath

I have come to realise that the "eco" doesn't mean "economics", in that handle.

\Clever :)

Very little that is remotely decent sells for under $600k in Auckland. If you could shoebox apartments that fit a single bed and a desk then you might find a couple.

Well , have you been looking??
here are some shoeboxes for you on the EXPENSIVE Auckland NorthShore:

need more? ... just ask

A serious question... Are you John Key or Nick Smith?
Even more serious questions; Do you believe that vaccinations cause autism? Do you believe there is a male/female wage gap?

I only ask because I haven't heard nearly enough uninformed discourse today and you may be able to fix that..

I like to think of the housing market at the moment like this:

Property has made the shift to be a common investment vehicle (over and above that of the personal home). This means we should expect it to behave as an investment.

We can contrast what's happening in Auckland to what might happen on the stock market. Housing investments have two sources of return, capital appreciation, and rental returns. This is much the same as a share in Air NZ, its price on any given day will be a function of the expected future share price and the expected future profits of it's airline business.

What we have seen in the property market is a price appreciation based on the expected future capital appreciation. Rental returns (yield) has fallen relative to prices. In order for this to continue people must believe that the capital appreciation will continue. Anything different will mean either rental returns need to increase dramatically or house prices need to fall. I know which one is easier.

I don't buy that the housing shortage is as bad as everyone is making out as I think we would have seen a much larger rental return led price appreciation otherwise.

In essence prices have overshot their fundamental value (rental returns) and are now being driven by speculation on capital appreciation. Investor money flows to where the best return is therefore it's just a matter of time until the music stops and prices have a demand correction. Nobody wants to catch a falling knife.

and theres a even nastier kicker coming ... namely future incomes must fall as energy becomes more expensive, which means even less affordability for rent ...

can you elaborate?

I too would be interested in the logic behind this statement..

my understanding of the original statement refers to "net disposable income"
As energy costs rise disposable income will fall

And incomes won't rise with energy costs?
Also, what energy costs are they referring to?

petrol, travel

Yea, that doesn't change net income in the long run to any significant extent..

Not just petrol , travel. EVERYTHING! Think food, construction products, plastics, roads, etc etc

Okay, so state "fossil fuels" then as the primary source.
Don't just say "energy", as they are not always synonymous. And their impacts on economies are significantly different across the board.
And, FYI, our global fossil fuel reserves are enough to see us out at current production levels for centuries...

Energy is the unit, regardless of how it is produced, but Oil (then coal) are by far the key sources - And you have to think of the world economy as a whole system.
Your last statement is wrong - It is not about how much is out there - Reserves vary depending on price. If it costs more than its worth to extract a barrel, its actually not part of reserves at all. So reserves are all about viability. And the way our financial system works is that we need iINCREASING NET energy supplied to the economy each year, not a steady amount.

You imply incomes rise and fall with energy costs?

Remind me, did incomes fall when OIL fell from $100 pb to $30 pb

Yes, they do. The problem is we have always had long term price inflation in fossil fuel costs, which is why we haven't seen it. It's sort of crazy to propose that an economic driver only ever has an positive impact when we want it to.

And yes to answer your question directly, incomes did fall. There was quite the fracking/tar sands/shale industry that got wiped out from the recent drop in oil prices. Plus, look at the account balances of countries relying on traditional 'cheap' oil extraction - their wealth significantly declined to.
So, even in your short term window there was a notable decrease in aggregate wealth per capita.

So, anymore condescending remarks to rebut?

@ two other guys .. "did incomes fall when OIL fell from $100 pb to $30 pb?"

You might want to ask Venezuelans.

Sure - hard to summarise quickly , but the basis of the economy is energy (surplus). A wealthy society is one with a large (energy) surplus at its disposal since everything consumed is the result of energy. And money or debt is just a claim on future energy surpluses. And the key thing is Oil, which brings huge energy surplus into the economy. Trouble is, society has built in a large "overhead" expectation of continued energy surplus, but extraction costs have been climbing sharply since the early 2000's, so net surplus is falling ... to get round this we need to bring ever increasing quantities ... which is appearing as a glut ...into the economy to allow debt growth just to service old debts, let alone raise more debt to lift prices. Running faster to stand still. In the meantime, incomes are not rising because surpluses aren't actually rising...

Mmmm, you mention some good points.
Energy consumption is intrinsically linked to to economic growth, however there isn't much research to identify the distribution of this energy source. Sure, it could be fossil fuel - and that's what it has been for many years. However, our 'energy' resources have significantly diversified over the years and in many cases challenged long term correlations or causation between energy consumption and economic indicators.
To expect that we have overestimated our expectations of energy availability is a leap, though. Energy is a commodity, so I just don't see how this could be achieved. There is no long term incentive to do this for the majority of consumption..

Energy is not just another commodity. If we got rid of milk, the economy would truck on. But if we got rid of energy ... there is no economy.
If you want far better explanations try ... a heap of discussion there

You misunderstand the meaning of commodity.
As in 1kJ = 1kJ everywhere. So yes, it is a commodity. significantly more so than your milk.
When I ask you to differentiate between fossil fuels and energy is because of the difference in production capability. Fossil fuels are both constituents for synthesis and energy production, thus the relationships that you cite are relatively contentious. In terms of pure energy, we have an abundance of that available at low cost, utilising renewable and nuclear sources. So, it is not acceptable to just say 'energy'.

Sounds very legit. Where have they published? Any tier A journals? Bs, perhaps?

"we have an abundance of that available at low cost, utilising renewable and nuclear sources"

If you are trying to get me to state all energy is not equal, then i totally agree. Concentration of energy is what makes fossil fuels so much better than renewables. You can't power a truck on a solar battery or from a nuclear power plant. To interpret that as us having an abundance of cheap energy is to misdiagnose the problem. And yes, the author has been published, but given her non-happy ending conclusions, the views are not for public consumption.

You do realise that all renewables and nuclear combined accounted for a whopping 7.2% of energy use last year. You might want to ask yourself , given it is apparently so cheap, why this is so low.

True, you can't power a truck from solar energy. Currently.
However, technology will reduce our dependence on energy dense fossil fuels for this. Perhaps in the next 20 years we may be able to.
In the majority of cases, we have seen the relationship between energy consumption and economic performance indicators deteriorate as energy consumption dynamics change.

I just find it really difficult to imagine that the mainstream literature hasn't picked up on your energy surplus doomsday theory, if it had merit. To say it is because it is not 'happy-ending' is the most ridiculous excuse. This is the sort of thing scientists search their whole lives for; something radical to explain the natural world. Plus, it is no less dire than the climate change debate, and that gets a good amount of coverage for being so morbid..

I'll rephrase the non-happy ending bit - her conclusions are that there isn't any viable fixes. You cant run a cheap energy infrastructure on expensive to produce energy. This is the bit that isnt palatable, and counter to standard scientific thinking (especially re gaining funding).

The themes are not new - limits to growth was published in the 70's for example, but they are starting to seep into MSM, who then want to know and publish how the root problem can be addressed... if we only vote/promote/ban/switch/print etc etc ...

@ almost_confused .... You analysis is almost spot on with minor tweaks ....

rental property business is and always been ( in certain big towns) speculative and built on future Capital gain ( whatever its amount) and that has not changed in NZ for the last 40+ years - hence their rent yields are relatively low ... unlike some rentals in Gisborne and Taupo which yield could be up to 12% but have virtually no +ve capital gain to mention if not negative ...

rent return ( yield) is always known to lag behind the property price in major cities by 9-12 months before they catch up ... and they used to be 5-7% in the good days in Auckland , they are now hardly 3-4% ... however, and this is very obvious, Real estate capital gain compensates for the difference and pays for the expenses and then some IN TIME... the real reason why they are favourable is because Banks will lend you money against them as they know well that it is less risky than other investment classes ... Ok ... after the last LVR this became less attractive to most... but still good investment for people with spare cash.

All this speculation about a crash that is imminent and the music stopping etc falls in the wishful thinking and is no more than a baseless speculation itself ....unlike the share market that is purely driven by news, manipulation and rumors ....

this will be of interest to you:

Yes investor money flows where there is max return, but there is short term return like the AIR.NZ shares this month and the long term return in property market - there are no new wheels to be invented here - it is like that all around the world ...which is sneezing at the moment, that is why we caught a cold!!

Sorry for the long response , but should you have been in the Real Estate game long enough you would have known why this is not for the fainthearted .... Just like any other business there are risks involved, albeit calculated ones !

I am not trolling your comments Eco , but I have just snorted peas across the dining table. Wishful thinking and central bank deputy governors , at present go hand in hand .I will look forward to prices catching up to rental yields, oh the speculation .

Mr. McDermott was explaining why this is happening and how the world economy is affecting us .... maybe this subject was a bit too much to your liking ...sweet dreams

Actually some good points there.
However, your proposition only works in the case that there is infinite demand. In NZ we have been lucky in that our population growth has always been positive (meaning a perpetual undersupply in housing), hence the positive capital gain over the long term. And yes, rental yields are intrinsically linked/subsidised by this. However without positive demand, this collapses. Cut off immigration, CGT and foreign buyers and that demand quells pretty fast. I know this would never happen under the National Govt., but should Winston be the king maker, I would be pretty worried about the speculative potential of the housing market and all of those heavily leveraged investors out there.

Agreed nymad ... again we assume that demand will subside ... but it doesn't and didn't even when net population loss was at a rate of 20,000 and more a year few years ago ...
We also need to be specific here ... property investors don't use the same strategy in every town - there is no fixed pattern for this business ... there are towns which suffer continuous population loss and these have problems and you don't see many new houses built there .... However, you need 30 years of aggressive building to catch up with the current Auckland shortage !! -- these are opposition numbers , not mine !..

I will say it again, and there are few article on this, CGT does NOT reduce prices or demand just pushes prices up in towns suffering from severe shortages like Auckland, Sydney, Melbourne and have high continuous demand.... look how Sydney prices have gone up and still are ... and they have all sorts of stamp duty and CGT ....taxed to the teeth as they say...

One last important ,often overlooked, point ... there is too much money at stake tied directly to property prices in the country, not only the intrinsic value of the house to the owner but the security these houses represent to the banks which have lent Millions to businesses in existence ( mostly SMEs ) ..... these employ thousands of people collectively paying Millions of dollars in TAX every month .... this is the fact of the current economy ... so no one will allow or be allowed to pull that rug from under these businesses and wreck the country .... no one is that foolish to shoot themselves in the foot be it Nats Labour or even the Greens and commit instant political suicide ....

So slogans, theory and BS aside ... there are serious consequences to any reckless decisions around the housing market ... and I believe that apart from the political point scoring and early election campaigning that is going on, No political party will dare touching Negative gearing, or other means to crash the housing market dramatically !!

CGT? ..maybe !, but i say it proved to be useless wherever it has been used so far ...and the last thing people need is another TAX.

Actually , Mr. Peters is a very wise and astute person, he has his moments like all of us, but he knows how the economy works and been Finance Minister and exposed to the drivers of the economy ... so if he reaches the bargaining table after elections, then that will be a good PLUS to the future government...

CGT definitely has an impact on prices and demand. It would be pretty silly to suggest that it doesn't.
Dependent on your position on the elasticity of the market dictates the debate on the flow through mechanism, however.

Yes, the banks are too big to fail. A definite fault in the system.
But, the house owners/landlords are not and they should realise 100% of the risk they have undertaken. You can only prop up the economy/asset with nominal wealth for so long before it collapses. If you only believe only one economic truism, this should be it.
As soon as consumption stops, Auckland and NZ will be in a very bad place. With no real wealth generation, this must occur at some point. From there it is just a chain reaction, and a devastating one at that.

If things worked in the real world like they do in your head, we would have never experienced business cycle shock in modern history. Unfortunately, however, these have occurred and will always continue to.

These things are happening in the real world ....I am not imagining anything.

The above is NO fiction my friend, like a lot of investors I bought my first home and my investment properties between 2000 and 2007 when interest rates were almost twice as much today and when the market was rocketing upward similar to what is happening now !!... When the average 3 bed was around 200 - 250K and the new fancy ones would cost 500-800 to build .... funny that all the arguments and the whining about house prices and affordability was almost identical to what we hear today ....and funny that we had a surge of chinese immigration from Hong Kong buying big spacious house off the plans before even landing in NZ @ $800k+ a pop...
this is the time when the suburbs of Howick, Dannemora, and many others were being built up .... And that was all under the Labour Gov. watch .... Winston was calling for CGT at the time, but no one listened... Go Figure!

Cycles do exist and markets, CGs and rents go up and down, Just like in any business ... we have seen many slowdowns and sometimes in the severe cases a bit of negative like in 2008 ...(which were all buying opportunities) ... but in the auckland property market we have never seen a severe pull back by more than 5 -10% , maybe a bit more for few coastal mansions .... and that was not a disaster ... you have to remember that sales volumes will come to a halt and prices will almost freeze ...whoever needs to sell will lose a bit but most won't. people rearrange finances and ride the cycle so the market conserves its average price - only the desperate will sell and people will reschedule their plans ... ... but when this system/market is manipulated or forced to crash by taxes or other interventions ... then that will have dire consequences and will threaten the banks and the economy .

Stretch this graph back to 1995 and observe the curve and watch the cycles....
BTW 1993 -1996 was a big immigration cycle too ...

Sales in Vancouver have come to a halt ... the funny drop in prices are on a very tiny volume and represents no real average price change ( it has only been a month) -- It only provides ammo for shallow journalism to cheer about for a while before eating their words or go underground...

Okay so just answer me one question then, because you don't seem to be seeing the point..
How do you maintain infinite demand to sustain your positive increases?
There is no real wealth generation in this country, so demand can only come from overseas. Eliminating that will kill the market.

The house price index graph doesn't really strengthen any of your points. Put a GDP per capita graph next to it up until 2008 and things don't look out of the normal at all.
The issue lies in the absolute value of housing relative to real wages and real wealth generation. It is this disparity that causes the issue.

Sorry Nymad, I suppose you are confusing yourself too many things at a time ...

The natural demand is always there, this is a live country we will always have regeneration, families growing up and splitting and net gain or loss due to people movements .... in addition to New immigration waves whenever the Gov of the day allows it in... However, the balance is dictated by S&D and always favours keeping the prevailing house market prices Steady for all the reasons I mentioned earlier .and that is for the benefit of all ( directly or indirectly) .... New development will slow down when the cost of new build is much higher than existing stock, and vise versa .. when house prices become subdued sales volumes will go down - that is what most people know as market forces!! that is what controls demand.

Do not confuse GDP with house prices, each has its own dynamics and contributors. for starters, property investment and price appreciation has a personal effect on individuals while GDP is what the whole nation produces in all sorts of products and services. And both curves could cross at any time for all sorts of different reasons.

Real Wealth generation? of course there is .... on a national economical level ..When house prices go up, it promotes new development, new business, more trade, more service, more money changing hands ... when house prices are stagnated or down, all the related industries will slow down big time - so if people work and get paid then that is wealth generation ( no matter what the amount is) ....When your house increases in price you can borrow against the difference and use that to start your own dream business ( and pay residential rates on the money borrowed instead of commercial rates) .... or use the equity and buy a rental, few years down the road , your paper wealth is up i.e. your net worth is up ... YES, we borrow from the future, I agree, BUT cash society is GONE for now and it is the time of paperless valueless money ...that you and I HATE , but that is life nowadays....
you may also cash that paper gain and do something with it -- and that goes in the economy and contributes to growth ... and all this will reflect in the annual growth numbers of the entire nation ... how can you not see "wealth" in all this....??
I will take sizable paper wealth any day !! instead of trinkle of cash.

Value of houses relative to real wages : well real wages are related to productivity, competition, and the state of the world ... because we are all interconnected and if people stop buying our goods then we are in trouble ... just look at the effect milk prices had on us lately .... so for people who can only resolve dealing with cash and real money the situation is painful and unfortunately they have to either better their skills and move up the chain, find another source of income and save, or wait for another lolly scramble from the government !! the same happened between 1999 - 2003 and in other times...
In fact , in the last 12 months, every family has had a pay rise between $50 - $200 a week due to cost reduction of fuel, food prices, and so many goods and services which became cheaper....

Unfortunately house prices rocketed in the last 2 years because of external influences leaving a lot of people out of the market ( the longer they waited the worse the gap became) .. but there are still opportunities for most to start now ...

My view is that : anyone who is waiting for a bubble to burst is risking to be completely shut out of the market in the next few years .... Why? because the cost of building new dwellings is going UP and that is one of two most influential factors of property prices ( beside the price of land) ... noticed some christchurch developers or companies went bust this week? Developers now refusing to build affordable homes in the Gov SDAs..?. on the other hand , noticed the home loan affordability report published here :

So if people focus on what they can do to improve and put their thinking into positive steps ... instead of hoping and praying for the sky to fall, or energy prices to rise, or any other disaster ( like Labour and Green Holding Office with the current crue) then they might have a better chance of riding the wave and getting on top of it....but that is only my opinion.

Eco bird. You appear oblivious to where incomes actually come from ... energy surplus. Without continued energy surplus, income can not rise and capital gains can only continue if interest rates keep falling... But they cant go and stay below zero without blowing the whole house of cards. And while we are currently importing people in lieu of our inability to raise incomes, this will only work as long as the whole financial system holds.
A train is coming.

You and this energy nonsense.
Please let us all know what you refer to with "energy".
Using the term unpredictably confuses economists as much as it would confuse a physicist.

Energy IS the economy. Incredibly, as you state, most economists dont know this.
I suggest you go to and start reading.

"unlike the share market that is purely driven by news, manipulation and rumors ...."

Spoken like a true Kiwi

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