Mike's Minute: It seems I know more about housing than Treasury

Author
Mike Hosking,
Publish Date
Wed, 14 Jul 2021, 9:39AM

Mike's Minute: It seems I know more about housing than Treasury

Author
Mike Hosking,
Publish Date
Wed, 14 Jul 2021, 9:39AM

Not that I want to blow my trumpet, but as it turns out, so far, I am better at predicting the New Zealand house market than Treasury.

That means, presumably, they would be keen to hire me.

Up until last week's revelations about them using their judgement not economic modelling, I felt under qualified, I mean I use judgement. I own homes, I am an investor, I read the market a lot, and I would back myself to have a pretty good handle on what's going on.

What I didn’t know was that that makes me an expert, as opposed to a mere commentator. And the experts have clearly been doing less than I have been.

So far, if you go back to the start of Covid, I have said housing would be fine and there would be no crater. I have said there will be no falls and there will be no tilting to the first home buyer. I said none of the policies announced by the government or the Reserve Bank will have a large, long term, or material effect on housing. So far, I am right.

Does that make me a savant? No. It makes me a regular New Zealander who, if you have your eyes open, is not driven by ideology and know a bit about history. You can pretty much call it the way I have, there is nothing all that clever about it.

This brings us to this week's data from the Real Estate Institute. Summation: more of the same. Year on year prices are up 29.8 percent. Record prices in four regions, number of homes sold was up 6 percent, it was the highest June in 5 years, number of days to sell down to 31, and stock is low, down from 21,000 to 14,000.

Agents’ reports say auctions and open homes are still buzzing. And the Institute says, "We expect volumes to continue at a solid level for the next couple of months...unless we see any changes in the underlying fundamentals."

Ah, the fundamentals. Today Adrian Orr at the Reserve Bank might have something to say about those. But, as I have also said for months now, governments and regulators don’t drive housing. Housing drives housing and what is clear, is we can see a very slight slowing down of the increases.

We can see lack of supply holds up prices. We can presumably see at some point, given we aren't bringing people into the country, that all those who want to will have bought a house. We will see interest rates start to rise at some stage, and that can't help but cool things. We hopefully see the odd house actually built thus increasing supply to soak up demand.

This time next year things should have settled, sort of like they always do. And then in another year or so it will go again. How do I know this? Because we have been here, many times before.

History is my guide, not Treasury. And definitely not fly by night politicians who don't have a grasp of reality.

And so far, if you're keeping score, one of us is getting it right.