The Dim-Post

July 6, 2016

If you build it they will come undone

Filed under: Uncategorized — danylmc @ 1:05 pm

If Labour are set to announce 100,000 new homes this weekend, the former Reserve Bank guy who just suggested that the government build 150,000 new homes to deliberately crash the housing market and devalue residential properties by 40% probably hasn’t done them many favors.

What even would that 40% hair-cut look like, by-the-way? Wouldn’t that bankrupt a huge proportion of Auckland property owners and destabilize our entire banking sector? I mean, I don’t think building that many houses would actually do that. They wouldn’t appear overnight, but over years, which would lead to a plateau rather than a market crash. But say it did happen!

50 Comments »

  1. Prices respond to expected prices. So if a party which the public believed was going to win the next election announced plans to build 100,000 new houses you would expect house prices to fall immediately. As things stand politically, of course, that won’t happen.

    Comment by Matthew Hooton — July 6, 2016 @ 1:21 pm

  2. The RBNZ stress testing of banks suggests they would cope with 40% price adjustment. We’re only talking a return to the levels before a few recent years of price increases.

    Comment by Upton — July 6, 2016 @ 1:22 pm

  3. I think your sentence about plateau not crash is the key one. I just don’t think you could build houses fast enough to crash the market, esp as demand keeps increasing with migration, etc. Bear in mind shortages of tradies, etc: if you tried to build fast the costs would escalate horribly anyway. Also, people who know much more about the housing market than me – like Bernard Hickey – have pointed out that with interest rates low, and banks ready to work with borrowers because they don’t want the economy to tank, people would be managed through a reduction in house prices – at least for small reductions.

    Comment by Max Rashbrooke — July 6, 2016 @ 1:26 pm

  4. It would take a hell of an effort to drop prices by 40% in the highest-demand city in the country. So that’s such a large number that it’s prolly not worth considering. If they dropped by half that, they would be back to where they were a couple years ago. Anyone who bought ANY property more than 2 years ago would have enough equity to be fine. Even those with negative equity in owner-occupied houses would still be able to live in the house. It would suck, but it wouldn’t wipe them out.

    All pretty immaterial because I’m not sure how Labour are going to build and sell 100,000 homes in less than a gazillion years.

    Comment by SG — July 6, 2016 @ 1:31 pm

  5. I suspect Grimes knew hadn’t used the word crash rather than real value depreciation over time no one would have listened to his proposal.

    As for a 40% drop, it’d leave people who’d bought in the last 4 years with small deposits with negative equity it wouldn’t bankrupt huge proportion of Aucklanders. Your house dropping in value won’t make you any less able to meet your repayments. The problem of a rise in interest rates and negative equity is what’ll bankrupt people, the faster prices take a hit the fewer folk will get themselves into trouble with borrowings they can’t repay with housing equity. As for the banks if we’re to believe Grimes, I would, they’re sufficiently capitalised and don’t have the USA’s jingle mail problem. Was nice of the Brits to provide an example of what happens in these situations – twice – http://www.independent.co.uk/property/house-and-home/up-to-630000-borrowers-are-stuck-in-negative-equity-as-the-housing-market-stagnates-8548584.html

    Comment by Richard — July 6, 2016 @ 1:36 pm

  6. The problem of a rise in interest rates and negative equity is what’ll bankrupt people

    That’s what I’ve been thinking could really crash the market. People suddenly paying 10% on all those million dollar mortgages. Not sure how it could come about though.

    Comment by danylmc — July 6, 2016 @ 1:38 pm

  7. But say it did happen!

    It does happen, everywhere in the world. Homes are being built much faster than Auckland everywhere. No imagination required, just have a look.

    …the former Reserve Bank guy who just suggested that the government build 150,000 new homes to deliberately crash the housing market and devalue residential properties by 40% probably hasn’t done them many favors.

    Building houses does not crash housing markets. Sydney, Melbourne, Brisbane, Vancouver, Tauranga all are building much faster than Auckland (mostly by building a lot more apartments). Some places have experienced price rises faster than Auckland.

    If Auckland managed to crawl up the urban planning competency tree from the bottom percentile idiocy of today and becomes somewhere with a mediocre, middle of the road, decidedly average building rate – 100,000 homes would be built every 5 years. And we would be experiencing property booms with high prices similar to, well, everywhere else that is normal.

    If Auckland Council suddenly became averagely competent, prices might stabilise or they might continue to climb. They are extremely unlikely to fall.

    We would merely have more apartments, less sprawl, less homelessness and a brighter future.

    Comment by unaha-closp — July 6, 2016 @ 1:50 pm

  8. “The RBNZ stress testing of banks suggests they would cope with 40% price adjustment.”
    “Anyone who bought ANY property more than 2 years ago would have enough equity to be fine.”
    “It wouldn’t bankrupt huge proportion of Aucklanders.”

    These are all points Andrew Little will be able to make in the media on Monday morning. I’m sure voters in Mt Roskill, New Lynn and Te Atatu will go “ah, well that’s ok then.”

    Comment by Matthew Hooton — July 6, 2016 @ 1:53 pm

  9. “As things stand politically that won’t happen”, suppose, Matthew, that non jaffas see a political method of tanking Auckland just for becauses, like Brexit. Then lols.

    Comment by Neil — July 6, 2016 @ 2:10 pm

  10. Be wary of comparing New Zealand mortgages with those of other jurisdictions because in New Zealand the mortgagor is responsible for the debt to the bank. In New Zealand it is not possible to walk away from a mortgage and just lose your deposit, like you can do in other places. If the bank forces a mortgagee sale and the amount does not cover the mortgage, then the mortgagor is still liable for the difference. This can result in bankruptcy.

    However, I think it extremely unlikely for prices to drop significantly just due to more dwellings being built. A 10% (or even 15%) drop is possible, but without other factors in play, I cannot see Auckland property prices dropping by more than that.

    Comment by Brent — July 6, 2016 @ 2:54 pm

  11. You’d see flow on effects in the building industry; the NZ construction sector is already plagued by boom/bust cycles, and in peoples’ ability to save for their retirements.

    Comment by Robert Singers — July 6, 2016 @ 2:57 pm

  12. If you do want to be scared by tales of house price collapse and rampant immigration, have a think about what is going to happen after the current property boom ends – if Auckland continues to not build.

    Everywhere from Sydney to Brisbane to Tauranga to Melbourne will have built plentiful homes and office blocks. Those places will be able to offer better rents and accommodate more businesses at lower cost.

    Auckland will be high rent and low growth and have massive inefficient exurban sprawl with woeful transport problems and a high debt.

    Comment by unaha-closp — July 6, 2016 @ 3:58 pm

  13. “The RBNZ stress testing of banks suggests they would cope with 40% price adjustment.”

    Are you talking about the recent RBNZ stress test that included a 40% fall in rural land prices and had absolutely nothing to do with residential property?

    Comment by Phil — July 6, 2016 @ 5:31 pm

  14. Managing the price impact of a large scale house building project would be very hard to do and overshoot would be a significant problem. A large multi year programme assumes a certain level of demand. If for any reason that changes that is when the big bust happens. That’s really the story of the GFC in the US, Spain and Ireland.

    “Also, people who know much more about the housing market than me – like Bernard Hickey ”

    Not sure someone who sold out of the Auckland market two to three years ago – and moved to Wellington – because of his belief there would be a sudden crash really qualifies as a housing expert.

    Comment by Tinakori — July 6, 2016 @ 5:33 pm

  15. Building houses does not crash housing markets.

    Tell that to Ireland. And The United States.

    Comment by Phil — July 6, 2016 @ 5:33 pm

  16. Well a plateau could lead to a crash. Like Hooton said, prices respond to expected prices.

    So if there’s a slowdown in growth, you might get some property investors thinking, “I’m not making money as fast as I wanted to; I’ll get out of the market now and make better use of my money.” So they sell their properties ASAP to do exactly that. But that depresses growth further, and results in a vicious cycle (possibly).

    Comment by Colonel Hacker — July 6, 2016 @ 5:35 pm

  17. Re: “Wouldn’t that bankrupt a huge proportion of Auckland property owners and destabilize our entire banking sector”.

    Yes, anyway solution to the housing crisis is liable to do that.

    Welcome to Frogstar World B.

    Comment by R — July 6, 2016 @ 7:22 pm

  18. Er.. excuse me does anyone know what labour is purportedly going to announce?

    Comment by peterlepaysan — July 6, 2016 @ 7:23 pm

  19. “… That’s really the story of the GFC in the US, Spain and Ireland…”

    I don’t know about the USA and Ireland put the post GFC debris in Spain is incredible. Spanish cities are generally remarkably compact, my town of 70000 you can work around completely in an hour and a half. And on the outskirts of every town and city (and sometimes just randomly in the countryside) are suburbs of abandoned developments, ranging from laid out and paved roads with street lighting but no houses to 90% complete rows of terrace housing just looted of anything useful and left just eerily sitting there with fly tipping, weeds and homeless alcoholics for eight or nine years now. The visual scars of the collective madness and greed, fuelled by cheap money and a culture of nod and wink corruption, is staggering to behold. You really have to see it to believe it. NZ is nowhere near Spain’s crazy bubble yet, and we are not so corrupt that the really crazy stuff could happen (although who knows, maybe Key will make Saudi McCully minister of housing and then all bets are off) so I would be careful about drawing comparisons between the two countries.

    Comment by Sanctuary — July 6, 2016 @ 7:51 pm

  20. work around = walk around

    Comment by Sanctuary — July 6, 2016 @ 7:55 pm

  21. If investing in bakeries was a popular retail investment activity and there were huge regulatory barriers to building more and everyone was scrimping on bread… Would we avoid increasing the bread supply so as not to affect returns of mum and dad bakery investors?

    Comment by swan — July 6, 2016 @ 8:33 pm

  22. It just seems a short time ago we were all obsessed with sex and music. Now it’s property and apparently in the not so distant future it’ll be our bowels.

    I think any Big Solution runs the risk of unintended consequences. Crashing house prices would shut down building and cashed up investors would swoop in to buy up large.

    It needs a large number of small solutions which is harder for opposition politicians to sell but is what the current govt has been doing.

    Comment by NeilM — July 6, 2016 @ 9:21 pm

  23. Good to see NeilM channelling his inner fisiani….

    Comment by Sanctuary — July 6, 2016 @ 9:40 pm

  24. NeilM no one has done what needs to be done that should be fairly obvious.

    Comment by Matthew W — July 6, 2016 @ 9:58 pm

  25. What needs to be done might be a number of small interventions over a period of time.

    Comment by NeilM — July 6, 2016 @ 10:28 pm

  26. Would we avoid increasing the bread supply so as not to affect returns of mum and dad bakery investors?

    Depends. If there were a large number of governing-party-voting bakery investors, including high concentrations in electorates the governing party would find it embarrassing to lose, I expect the answer would be “What bread crisis?” followed by “Let them eat cake.”

    Comment by Psycho Milt — July 7, 2016 @ 7:43 am

  27. The unusual thing about Auckland is it accommodates near 40% of the population and a huge whack of services and industry. Unlike other parts of the world would be house owners would shrug and move to other big cities with plenty of career options and thus spread the load.

    Its taken a long time but thats now starting to happen in NZ.. people are moving to other regions, eg Rotorua, which has dragged its housing arse for decades experienced 20% house price rises in the past year as demand has exploded.

    The question is not when Auckland settles down but when the migration boom reverses as it always has.. a govt with 3rd termitis and a not very good opposition could well start to impact and as the regional houses get more expensive NZ won’t look so great anymore. Continued Auckland Council incompetence could also make NZ look less attractive.

    I dunno, but I wouldn’t want to see $30-50 billion borrowed for a huge building programme when people start fleeing the country again.

    JC

    Comment by JC — July 7, 2016 @ 9:11 am

  28. Okay Phil, just for you.

    Tell that to Ireland. And The United States.

    Dear Americans and Irish people,

    Phil thinks that the GFC occurred, because you people built too many homes. Phil thinks the banks, packaged debt tranches, crooked rating agencies, woeful oversight are blameless.

    I think it is extremely unfair to blame you and you were merely the victims here of an artificially inflated asset bubble created for the enrichment of a select few. I am absolutely positive building houses did not cause the GFC.

    Regards u-c

    Comment by unaha-closp — July 7, 2016 @ 10:25 am

  29. If you build 100,000 houses, then that would tend to increase the price of land, as you’d be increasing demand for land.

    As a result, house prices would go up irrespective of how ever many new houses came onto the market – it would just be validating the idea that houses/land are a no-lose leveraged investment.

    This isn’t a market, it’s a bubble.

    Comment by richdrich — July 7, 2016 @ 10:54 am

  30. “This isn’t a market, it’s a bubble.”

    If so its one we likely have little control over as it gets driven from offshore..

    http://www.stuff.co.nz/business/money/80588475/nz-and-australias-housing-markets-behave-as-one–ubs

    “Overall, the research concludes that there is a common shock that is first felt in Melbourne and Sydney, which then flows to the more peripheral Australian cities, as well as the key New Zealand cities of Auckland and Wellington, before eventually impacting peripheral cities in New Zealand,” UBS says.

    “This could be the transmission of global forces, the impact of migration trends, or the consequence of convergent Reserve Bank of Australia and Reserve Bank of New Zealand monetary policy.”

    According to UBS, all this shows the limitations of independent monetary policies against global forces, and the limited ability of New Zealand to influence its housing markets, except “temporarily with rates or macro-prudential policies”.

    JC

    Comment by JC — July 7, 2016 @ 12:33 pm

  31. Grow the fuck up, U-C.

    Of course those other factors are part of the problem – I never said they weren’t. But at the core of the GFC was the simple fact that the number of houses for sale in the US, Ireland, Spain, and elsewhere, vastly exceeded the number of people willing to buy them… and prices tumbled. The situation was, quite frankly, no different to what we’re seeing in milk powder prices today, or commercial property development in the early 00’s, or even comedy clubs in the late 80’s and early 90’s.

    Comment by Phil — July 7, 2016 @ 12:39 pm

  32. “Of course those other factors are part of the problem – I never said they weren’t. But at the core of the GFC was the simple fact that the number of houses for sale in the US, Ireland, Spain, and elsewhere, vastly exceeded the number of people willing to buy them… and prices tumbled. The situation was, quite frankly, no different to what we’re seeing in milk powder prices today, or commercial property development in the early 00’s, or even comedy clubs in the late 80’s and early 90’s.”

    So we have had financial crises caused by milk powder prices dropping, commercial property developments in the nouties and comedy clubs? Come again?

    Comment by Matthew W — July 7, 2016 @ 12:51 pm

  33. It will look like when Marac crashed in 1992.

    Edwardian villa in Aro Valley, mortgaged for $145k in 1990, sold at a $40k loss in mid-1992, for $105k, including a $5k second mortgage to the vendor.

    (this was the first home we bought, which is why the figures are indelibly imbedded in my brain – we had no student loans, had rented since the ’87 crash, and finally, we got our chance to buy when prices corrected on the property bubble that commenced when everyone pulled their profit from shares a week before the crash – y’know, the week JonKey made $60mill shorting NZ currency …)

    Comment by anarkaytie — July 7, 2016 @ 12:56 pm

  34. But at the core of the GFC was the simple fact that the number of houses for sale in the US, Ireland, Spain, and elsewhere, vastly exceeded the number of people willing to buy them… and prices tumbled.

    You’re missing the “why” here, Phil.
    The oversupply was an effect, not a cause.

    Comment by Gregor W — July 7, 2016 @ 1:30 pm

  35. You’re missing the “why” here, Phil.
    The oversupply was an effect, not a cause.

    This!

    But at the core of the GFC was the simple fact that the number of houses for sale in the US, Ireland, Spain, and elsewhere, vastly exceeded the number of people willing to buy them… and prices tumbled.

    You are saying that if the people of America and Ireland had not built houses, merely plunged those same vast sums of money into buying land and trading land and driving the price of land ever upwards that the GFC would never have happened?

    Well good news, we get to find out.

    In Auckland 200 sq.m sections sell for about $700,000 and we have a building rate so slow that our housing shortage is forecast to persist for decades. In Brisbane land costs $350,000 and they are building apartments quickly, heading for a housing surplus in 2018.

    I think the land price in Auckland and the construction boom in Brisbane are both the results of an easy monetary supply for investment. I think that when the investment dries up both of these places will suffer a correction. Brisbane post correction will be offering plentiful office space and low cost rental living. Auckland will offer high rents and limited housing availability.

    Not great for Auckland.

    Comment by unaha-closp — July 7, 2016 @ 2:41 pm

  36. It’s possible that some unforeseen major economic shock could effect the entire market but more likely specific parts of the property market could lose value. What effects Nth Shore coastal properties probably won’t have much influence on inner city apartments.

    Comment by NeilM — July 7, 2016 @ 7:57 pm

  37. What effects Nth Shore coastal properties probably won’t have much influence on inner city apartments.

    There is constrictive RUB around the entire city, which means all of it. It is the reason apartment building is so slow in Auckland, land costs are too high to make building economical, likewise suburban growth is so slow.

    And for the same reason but reverse effect, Auckland is experiencing a huge sprawl of exurban growth. Exurban growth is outside the RUB and with Auckland ratepayers paying for the infrastructure, it is freakishly cheap to smack down the countryside and sprawl like crazy.

    Comment by unaha-closp — July 7, 2016 @ 8:47 pm

  38. Most interesting facet of the Ak bubble crisis is the fact that the market is moving against JK, whose entire reputation derives from his expertise & track record in reading the market. The news that Hamilton is up 29% the past year is a fairly dramatic indicator that the bubble is no longer heading south slowly. Key won’t get that inevitable 4th term as PM with the country sliding into chaos – only if he reverses that slide. Thus his terse `get a move on’ advice to the reserve bank a few days ago.

    Advocating free markets starts to look like lunacy when a market gets out of control, so no surprise to see him reaching for the regulator like a cowboy reaching for his whip when confronted by a herd of steers shifting into stampede. No David Seymour spouting his ideological purity mantra in response to government regulation of the housing market; perhaps a streak of pragmatism in the fella? The extreme right will be scurrying back down into their burrows…

    Comment by Dennis Frank — July 7, 2016 @ 9:49 pm

  39. There is constrictive RUB around the entire city, which means all of it.

    I’m the chairperson of a body Corp for a central Auckland apartment building so have had to think about the Auckland property situation on pretty much a daily basis. I’d prefer not to have to.

    My impresarion is that the speed of demographic changes outstripped the response time of both central and local govt.

    And, this might not be a popular opinion, but the person who has done the most to look at dealing with the issues surrounding body Corp governance has been Nikki Kaye. Which in practical terms will have a far greater Poitier effect on intensification than idle talk of Chinese sounding names.

    Comment by NeilM — July 7, 2016 @ 9:56 pm

  40. @unaha-closp: The RUB doesn’t exist yet. It will only exist once the Urban Plan is approved. Further, it is not particularly constrictive at all: rather, it is where planned infrastructure is allowed for: If you want it larger you have to be able to finance the infrastructure. There is significant green-field land inside the proposed RUB (enough for 40% of the growth to 2030) in addition to existing brown-field land of which there is still plenty.

    Also, apartment growth is starting to boom again – it’s growing faster than construction of single dwellings. Further, apartments are more likely to be built when land prices are high as the cost per unit is obviously lower. As long as they’re allowed of course! The PAUP isn’t as good as it could be in this regard – lots of silly rules (e.g. volcanic view shafts) – but the predominant issue is NIMBYism meaning less density than there should be, along with lying councillors decrying 3 stories as being apartments (many of their constituents live in huge 2-3 storey homes…)

    Comment by jmarshall — July 7, 2016 @ 10:10 pm

  41. There’s a few issues with apartments though that need to be resolved if they are to be a sucesful long term intensification option.

    NZ doesn’t really have an apartment living history as many countries have and our apartment ownership system may on the whole be quite different. The last thing we need is a whole bunch of apartment complexes falling over financially and in terms of maintainance.

    That would put a substantial damper on the apartment market and has been happening to a degree and could happen with quite nasty consequences for people in the future.

    It’s issues like those – that don’t get the Build A Million Houses attention – that may be the real, solvable issues.

    Comment by NeilM — July 8, 2016 @ 7:19 am

  42. @jmarshall,

    Yeah, the PAUP is sprawl happy piece of….

    There is significant green-field land inside the proposed RUB (enough for 40% of the growth to 2030) in addition to existing brown-field land of which there is still plenty.

    Most greenfield land is sprawl at Pukekohe, Clarks Beach, Kumeu, Silverdale and Warkworth. Only a minority of the greenfield land is around Auckland. This makes the City of Auckland very restricted, with very high land prices and construction costs. And it makes sprawl in all those exurbs highly subsidised and very cheap. Auckland makes the cost of building very high in Auckland where lots of people want to live and very low in Warkworth (etc.) where few people want to live.

    Also, apartment growth is starting to boom again – it’s growing faster than construction of single dwellings.

    Booming compared to where? Apartment growth here is very slow, excruciatingly slow, painfully slow compared to the rest of Australasia.

    Further, apartments are more likely to be built when land prices are high as the cost per unit is obviously lower.

    WTF? If we increase the cost of building apartments, we do not get more of them built.

    If lots of people want to live in an area, then they will pay to live in apartments. If we make the cost of building low we will get more apartments built, but if we make the price high we will get less built.

    – but the predominant issue is NIMBYism meaning less density than there should be, along with lying councillors decrying 3 stories as being apartments…

    If it was NIMBYs we would have normal apartment growth rates where we are allowed to build apartments, but we have apartment build rates in the CBD about 70% slower than normal (compared to Brisbane).

    So it is not NIMBYs, it is the anti-urban lobby that is getting the mayor and his council to ram through the pro-sprawl PAUP.

    Comment by unaha-closp — July 8, 2016 @ 10:32 am

  43. @NeilM,

    My impresarion is that the speed of demographic changes outstripped the response time of both central and local govt.

    Tauranga is building more apartments per capita than Auckland. This should not be possible, because most of the drivers for apartments do not exist in Tauranga – long commutes and high agglomeration numbers. However it is happening.

    Therefore we can see that the response time of the Tauranga market is very much faster than Auckland. Local government in Tauranga and central government in NZ have created conditions where a fast responsive market can operate.

    Comment by unaha-closp — July 8, 2016 @ 10:41 am

  44. NeilM

    “What needs to be done might be a number of small interventions over a period of time.”

    That is basically a non statement. The fact is what has been done isnt enough to prevent what has happened – an explosion in property prices. The problem has happened. The idea that a softly softly approach is the way to go – if that is what the government has been doing it certainly hasnt worked. The fact is the National Party was very concerned about property prices back before the GFC. For some reason between 2009 and about 2013, when they could have been fixing things they did bugger all.

    “It’s possible that some unforeseen major economic shock could effect the entire market but more likely specific parts of the property market could lose value. What effects Nth Shore coastal properties probably won’t have much influence on inner city apartments.”

    The evidence is property prices in different segments of the Auckland market are highly correlated. Absolute beachfront trophy houses possibly excepted but that is a red herring.

    Comment by Matthew W — July 8, 2016 @ 11:25 am

  45. To the extent to which the policy would cause a drop in the price of houses, and leave people with huge mortgages over less valuable houses.

    That is too bad, but somewhere in the area of 30-50% of them are buying these places as investments, and investments carry risk, particularly when you are banking on regulatory failure such as the massive tax advantages associated with investment property.

    Comment by Michael — July 8, 2016 @ 12:05 pm

  46. Basically, National are scared (and ideologically hostile) to take effective action (as was the Clark government in turn).

    Eventually, the money will run out: banks have to refinance their lending on a regular basis, and even if nothing bad happens, asset allocation people in global institutions will start to notice that NZ mortgages have reached 5-10% of their assets when NZ is 0.28% of the world economy.
    (Or China will get in trouble and the NZD will crash, scaring everyone out of the carry trade. Or there’ll be a big crash in Britain, scaring everyone away from funny little currencies. Or we’ll just get a repeat of 2008, but without China to keep us going and finance companies to form a crumple zone).

    The challenge for the left (dunno why I’m posting this, nobody left of Peter Dunne reads this blog) is what do do when AKL house prices are crashing 40% and the cash dispensers have suddenly dried up..

    Comment by richdrich — July 8, 2016 @ 5:08 pm

  47. The fact is what has been done isnt enough to prevent what has happened – an explosion in property prices.

    True, but I was thinking more that any intervention can have unwanted consequences – eg higher interest rates can slow price increases but cut people on low incomes out of the market – and the larger the intervention the larger the possible negative results.

    A large portion of Auckland’s housing problem is the result of NZers coming back from Australia – something the govt cannot control. I think it odd then expect a govt to have any simple solution.

    I think the best is approach is a series of small interventions over time but that is a harder political sell.

    Comment by NeilM — July 9, 2016 @ 1:16 am

  48. I think the best approach is liberalising land use and committing to continuing to until house prices get back to a reasonably affordable level. Eg height limits double until prices are affordable.

    Comment by Matthew W — July 9, 2016 @ 8:01 am

  49. The challenge for the left (dunno why I’m posting this, nobody left of Peter Dunne reads this blog) is what do do when AKL house prices are crashing 40% and the cash dispensers have suddenly dried up..

    Why would it be a challenge, and why only for the left? If and when there is a significant price reduction in housing, people will have to adjust their expectations. Any price reduction will be largely notional.

    Comment by Ross — July 9, 2016 @ 8:57 am

  50. If somebody has an house they paid $800k for that’s worth $500k, the mortgage is $600k and the interest rate has doubled, then they’ve got a problem and so has the bank.

    Comment by richdrich — July 10, 2016 @ 2:48 pm


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