Global Opportunities Beyond the Radar

Brace for Impact: A Kiwi Housing Crash in 2023?


I had cause recently to sit in a wine bar with a real estate agent. Not just any real estate agent. The owner of two branch offices, overseeing many agents.

He will remain nameless. But what he said, I found startling. Even though I’d been predicting pain for the property market over a year ago.

‘I don’t think the crash has come yet,’ he told me.

I sipped my pale ale and listened.

‘Home sales are stalled. Buyers can’t get the money anymore. Listings are piling up unsold.’

We learnt this week that New Zealand’s home prices have fallen 15% since their peak in November 2021.

This is not that interesting, since they’d enjoyed a greater run-up following the cheap money of Covid in 2021.

But I’ve learnt something. According to my real estate agent friend, interest rates and the availability of finance have the greatest bearing on prices. Far more than immigration, returning Kiwis, FOMO, or a supposed housing shortage.



A tale of two markets


Interest rates are set to drift higher as OCR lifts try to quell inflation.

There is some let-up in the inflation story — but not much:

There doesn’t seem to be much shortage of sellers right now. But buyers are few and far between. They’re taking their time and exhibiting FOP (fear of overpaying).

After all, as they say in stock-speak, who wants to catch a falling dagger?


Ryman William Sanders retirement village, Devonport. Source: Ryman Healthcare


Ryman Healthcare [NZX:RYM], one Kiwi stock closely related to the housing market, is down around 50% over the past year. Investors fret over their debt. But perhaps even more the choking of the property market upon which they rely.

There are three main prongs supporting the New Zealand property market:


Source: CoreLogic, September 2022


Note, these numbers were reported last year. Things are changing:

We predicted this earlier in our research over the past year:


What is really investable?


Should houses be speculative investments?

They are ultimately social goods for people to live in, aren’t they?

But here in New Zealand, they became market instruments. To be leveraged. To deliver yield. And moreover capital growth.

The more investors chased them, the less attractive they became as net yields compressed due to rising prices:

As my friend in the wine bar pointed out, this cycle is probably only getting started.



A better path?


Australasian household debt, the lion’s share of which is mortgage debt, is among the highest in the world.

Simply, overpriced housing markets — especially in New Zealand where incomes are lower — mop economic strength.

A meaningful correction then poses serious risks:

Too much of the New Zealand economy involves selling one another homes.

But we knew this.

As investors, we can diversify into other industries, sectors, and countries via financial markets:

It may well be we are coming to the end of a 25-year supercycle in property gains.

As most Kiwi investors have been in the market for a long time, a majority should be safe. Although the future is not going to resemble this profitable past, unless a new government changes the rules.

My mortgage-broker contacts tell me inquiries are down 40%. The quality of leads is lower. And conversion is down 50%.

And then there’s that wine-bar chat.

So, would you bet on a wider Kiwi housing crash this year?



Simon Angelo

Editor, Wealth Morning

PS: We handle individually managed accounts in global stocks for Wholesale and Eligible Clients. If you would like further info on this opportunity beyond the radar, please click here.

(This article is commentary and the author’s personal opinion only. It is general in nature and should not be construed as any financial or investment advice. To obtain guidance for your specific situation, please consult a licensed Financial Advice Provider. Vistafolio services are for Wholesale or Eligible investors as defined in the Financial Markets Conduct Act 2013. Please request a free consultation if you would like to discuss your eligibility.)

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