It ain’t what you don’t know that gets you into trouble.
It’s what you know for sure that just ain’t so.
—Mark Twain
It was an incredible melt-up.
Between 1998 and 2022, the IMF reported that house prices in New Zealand had surged by over 250%.
This is an astonishing statistic. Especially when you consider what happened in other OECD nations: they only delivered an average price rise of around 70%.
In other words, Kiwi real estate was punching above its weight. Accelerating over three times faster than its peers. The pace was dizzying.
So, naturally enough, property investors felt invincible. Unstoppable. They were chasing the biggest lolly scramble of the century.
Like I said, it was a melt-up.
But what happens after a melt-up?
Well, I’ll let Liam Dann have his say here…
Source: The New Zealand Herald
Source: Quotable Value
So, can we call this a crash? Is it really? Well, the mainstream media loves clickbait. Because of this, it can be hard to tell the difference between sensationalism and authenticity. But for the sake of being factual, here’s what I do know:
- Since hitting its peak in January 2022, New Zealand property values have experienced a pronounced slump. We’re now closing in on Year 4 of a decline.
- At the moment, the housing market in Auckland City is almost 20% lower from its historic high. Wellington City is faring even worse. Around 27% down from its peak.
Mind you, it’s not just property investors and real-estate agents who are feeling the pain here. Tradies and contractors are experiencing a sucker punch as well.
- What we’re seeing is a ripple effect, impacting anyone with even the most tangential connection to property. This is a ‘doom loop’. Negativity creates more negativity. Pessimism breeds more pessimism.
- When people are feeling poorer because of falling house values, they will tighten their belts, and they become reluctant to spend. What we’re getting is a spillover to the wider economy. The sour feeling is obvious.
So, here’s the trillion question: what comes next for Kiwi real estate? What does the future looks like? What’s the outlook?
- Well, if you’re an optimist, you might be inclined to believe that the worst is already behind us. Perhaps house prices have already bottomed out. Perhaps the sector is poised for a V-shaped recovery. Perhaps New Zealand will return to what HSBC economist Paul Bloxham once called a ‘rock-star economy’.
- However, if you’re a pessimist, you might be inclined to believe the exact opposite. Perhaps the worst is yet to come for the Kiwi economy. Perhaps the decline in residential real estate is only getting started. Perhaps the long-term damage will be more painful than anyone dares to imagine.
So, which perspective do I favour?
- Well, I can tell you now: I’m neither an optimist nor a pessimist. Instead, I’m choosing a third option: being a realist.
- Let’s put euphoria aside. Let’s put despair aside. We need to look seriously at the facts on the ground.
- Here are 3 Urgent Signals that are flashing red. If you’re an existing property owner, I urge you not to skip this…
Your first Quantum Wealth Report is waiting for you:
