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House prices in New Zealand increased last month by more than any other month in the last 25 years. More than any other month since March, 1996.
Just think about that. We’ve had a residential housing crisis for years. House prices have been rising and rising and rising. We have our borders closed, our single-biggest export industry has been turned off and shutdown overnight. And yet... with inflation pouring into asset prices, median house prices increased more last month than in any other month since Braveheart won best picture at the Oscars.
According to the Real Estate Institute, the median house prices in Wellington and Auckland increased by about $100 thousand dollars in February. The median price in Porirua – Porirua! – increased more than $270 thousand. Ten thousand dollars a day.
When I hear those kind of numbers, I have a couple of reactions. Selfishly, I feel grateful that I have the security of already owning my own place. Secondly, I feel for people who don’t, and who’ve just seen their deposit requirements increase by tens of thousands of dollars.
But most of all I wonder this: how will this end?
Three years ago, Labour came to power promising to address the housing crisis. They failed. Kiwibuild was a disaster. House prices increased 27% in their first term before this even-crazier spike. They didn’t introduce any tax changes policies that meanfully changed the equation. No person in a position of political leadership publicly supported any policy that would significantly reduce house prices.
And truthfully, that was the time to do it. I’m talking about the difference between policies that would simply slow price inflation and policies that actually go further and reduce property value. I accept that introducing dramatic changes now and wiping 15 or 20 percent off house values could be disastrous for our economy in what is already a temultuous moment. Cliches abound, but the horse has bolted. There is no putting the genie back into the bottle. You can reform the RMA and address supply-side issues. You can call on the Reserve Bank to consider loan-to-debt ratios and limits on interest-only loans. But it’s too late. House prices are already way too expensive.
So. Back to my question.
How will this end? What’s the end game for a nation with some of least affordable housing in the world, where according to the ASB Housing Confidence Survey, a record 73% of people expect house prices will keep rising over the next year?
I will repeat this again. Last month, the median house price in Porirua increased ten thousand dollars a day. Nothing against Porirua, but does that sound right and balanced, to you?
At some point there has to be a correction. Our politicians might not be prepared to take on the middle-aged voters who own all the assets, but corrections take many forms.
Regardless of whether you own property or not... this will affect you. It will affect all of us.
I worry it will be very ugly, indeed.