NZ Herald
  • Home
  • Latest news
  • Herald NOW
  • Video
  • New Zealand
  • Sport
  • World
  • Business
  • Entertainment
  • Podcasts
  • Quizzes
  • Opinion
  • Lifestyle
  • Travel
  • Viva
  • Weather

Subscriptions

  • Herald Premium
  • Viva Premium
  • The Listener
  • BusinessDesk

Sections

  • Latest news
  • New Zealand
    • All New Zealand
    • Crime
    • Politics
    • Education
    • Open Justice
    • Scam Update
  • Herald NOW
  • On The Up
  • World
    • All World
    • Australia
    • Asia
    • UK
    • United States
    • Middle East
    • Europe
    • Pacific
  • Business
    • All Business
    • MarketsSharesCurrencyCommoditiesStock TakesCrypto
    • Markets with Madison
    • Media Insider
    • Business analysis
    • Personal financeKiwiSaverInterest ratesTaxInvestment
    • EconomyInflationGDPOfficial cash rateEmployment
    • Small business
    • Business reportsMood of the BoardroomProject AucklandSustainable business and financeCapital markets reportAgribusiness reportInfrastructure reportDynamic business
    • Deloitte Top 200 Awards
    • CompaniesAged CareAgribusinessAirlinesBanking and financeConstructionEnergyFreight and logisticsHealthcareManufacturingMedia and MarketingRetailTelecommunicationsTourism
  • Opinion
    • All Opinion
    • Analysis
    • Editorials
    • Business analysis
    • Premium opinion
    • Letters to the editor
  • Politics
  • Sport
    • All Sport
    • OlympicsParalympics
    • RugbySuper RugbyNPCAll BlacksBlack FernsRugby sevensSchool rugby
    • CricketBlack CapsWhite Ferns
    • Racing
    • NetballSilver Ferns
    • LeagueWarriorsNRL
    • FootballWellington PhoenixAuckland FCAll WhitesFootball FernsEnglish Premier League
    • GolfNZ Open
    • MotorsportFormula 1
    • Boxing
    • UFC
    • BasketballNBABreakersTall BlacksTall Ferns
    • Tennis
    • Cycling
    • Athletics
    • SailingAmerica's CupSailGP
    • Rowing
  • Lifestyle
    • All Lifestyle
    • Viva - Food, fashion & beauty
    • Society Insider
    • Royals
    • Sex & relationships
    • Food & drinkRecipesRecipe collectionsRestaurant reviewsRestaurant bookings
    • Health & wellbeing
    • Fashion & beauty
    • Pets & animals
    • The Selection - Shop the trendsShop fashionShop beautyShop entertainmentShop giftsShop home & living
    • Milford's Investing Place
  • Entertainment
    • All Entertainment
    • TV
    • MoviesMovie reviews
    • MusicMusic reviews
    • BooksBook reviews
    • Culture
    • ReviewsBook reviewsMovie reviewsMusic reviewsRestaurant reviews
  • Travel
    • All Travel
    • News
    • New ZealandNorthlandAucklandWellingtonCanterburyOtago / QueenstownNelson-TasmanBest NZ beaches
    • International travelAustraliaPacific IslandsEuropeUKUSAAfricaAsia
    • Rail holidays
    • Cruise holidays
    • Ski holidays
    • Luxury travel
    • Adventure travel
  • Kāhu Māori news
  • Environment
    • All Environment
    • Our Green Future
  • Talanoa Pacific news
  • Property
    • All Property
    • Property Insider
    • Interest rates tracker
    • Residential property listings
    • Commercial property listings
  • Health
  • Technology
    • All Technology
    • AI
    • Social media
  • Rural
    • All Rural
    • Dairy farming
    • Sheep & beef farming
    • Horticulture
    • Animal health
    • Rural business
    • Rural life
    • Rural technology
    • Opinion
    • Audio & podcasts
  • Weather forecasts
    • All Weather forecasts
    • Kaitaia
    • Whangārei
    • Dargaville
    • Auckland
    • Thames
    • Tauranga
    • Hamilton
    • Whakatāne
    • Rotorua
    • Tokoroa
    • Te Kuiti
    • Taumaranui
    • Taupō
    • Gisborne
    • New Plymouth
    • Napier
    • Hastings
    • Dannevirke
    • Whanganui
    • Palmerston North
    • Levin
    • Paraparaumu
    • Masterton
    • Wellington
    • Motueka
    • Nelson
    • Blenheim
    • Westport
    • Reefton
    • Kaikōura
    • Greymouth
    • Hokitika
    • Christchurch
    • Ashburton
    • Timaru
    • Wānaka
    • Oamaru
    • Queenstown
    • Dunedin
    • Gore
    • Invercargill
  • Meet the journalists
  • Promotions & competitions
  • OneRoof property listings
  • Driven car news

Puzzles & Quizzes

  • Puzzles
    • All Puzzles
    • Sudoku
    • Code Cracker
    • Crosswords
    • Cryptic crossword
    • Wordsearch
  • Quizzes
    • All Quizzes
    • Morning quiz
    • Afternoon quiz
    • Sports quiz

Regions

  • Northland
    • All Northland
    • Far North
    • Kaitaia
    • Kerikeri
    • Kaikohe
    • Bay of Islands
    • Whangarei
    • Dargaville
    • Kaipara
    • Mangawhai
  • Auckland
  • Waikato
    • All Waikato
    • Hamilton
    • Coromandel & Hauraki
    • Matamata & Piako
    • Cambridge
    • Te Awamutu
    • Tokoroa & South Waikato
    • Taupō & Tūrangi
  • Bay of Plenty
    • All Bay of Plenty
    • Katikati
    • Tauranga
    • Mount Maunganui
    • Pāpāmoa
    • Te Puke
    • Whakatāne
  • Rotorua
  • Hawke's Bay
    • All Hawke's Bay
    • Napier
    • Hastings
    • Havelock North
    • Central Hawke's Bay
    • Wairoa
  • Taranaki
    • All Taranaki
    • Stratford
    • New Plymouth
    • Hāwera
  • Manawatū - Whanganui
    • All Manawatū - Whanganui
    • Whanganui
    • Palmerston North
    • Manawatū
    • Tararua
    • Horowhenua
  • Wellington
    • All Wellington
    • Kapiti
    • Wairarapa
    • Upper Hutt
    • Lower Hutt
  • Nelson & Tasman
    • All Nelson & Tasman
    • Motueka
    • Nelson
    • Tasman
  • Marlborough
  • West Coast
  • Canterbury
    • All Canterbury
    • Kaikōura
    • Christchurch
    • Ashburton
    • Timaru
  • Otago
    • All Otago
    • Oamaru
    • Dunedin
    • Balclutha
    • Alexandra
    • Queenstown
    • Wanaka
  • Southland
    • All Southland
    • Invercargill
    • Gore
    • Stewart Island
  • Gisborne

Media

  • Video
    • All Video
    • NZ news video
    • Herald NOW
    • Business news video
    • Politics news video
    • Sport video
    • World news video
    • Lifestyle video
    • Entertainment video
    • Travel video
    • Markets with Madison
    • Kea Kids news
  • Podcasts
    • All Podcasts
    • The Front Page
    • On the Tiles
    • Ask me Anything
    • The Little Things
  • Cartoons
  • Photo galleries
  • Today's Paper - E-editions
  • Photo sales
  • Classifieds

NZME Network

  • Advertise with NZME
  • OneRoof
  • Driven Car Guide
  • BusinessDesk
  • Newstalk ZB
  • Sunlive
  • ZM
  • The Hits
  • Coast
  • Radio Hauraki
  • The Alternative Commentary Collective
  • Gold
  • Flava
  • iHeart Radio
  • Hokonui
  • Radio Wanaka
  • iHeartCountry New Zealand
  • Restaurant Hub
  • NZME Events

SubscribeSign In
Advertisement
Advertise with NZME.
Home / Business / Personal Finance / Investment

How to survive a housing market crash

news.com.au
6 Aug, 2017 12:56 AM6 mins to read

Subscribe to listen

Access to Herald Premium articles require a Premium subscription. Subscribe now to listen.
Already a subscriber?  Sign in here

Listening to articles is free for open-access content—explore other articles or learn more about text-to-speech.
‌
Save

    Share this article

Suburban houses in Melbourne, Australia. Photo / 123rf

Suburban houses in Melbourne, Australia. Photo / 123rf

This story is about what you can do if Australia has a housing crash. Plenty has been written about whether we will or won't. This is not one of those stories. This is an if-then scenario. A handbook of what to do in case of disaster, if you like.

If housing prices fall, say, 25 per cent, do you want to be stuck in the middle getting covered in blood and gore, or do you want to be off on one side, your hand covering your mouth in horror, saying 'Ouch, that's gotta hurt!'

PROPERTY

If you have an investment property during a housing crash, well, you will probably wish you didn't. The decision is whether to discount it to secure a sale or hang on grimly. It's the perennial dilemma of an investor in a falling market, but really, it's a simple decision.

For owner-occupiers the decision will be more complicated. The value of a house to an owner-occupier is at least partly in the shelter, etc, that it provides, not the financial value. If your house is worth 25 per cent less suddenly, the value of the shelter hasn't fallen. And if you want to sell and buy a new place to live in, the new place has probably fallen in value too, so you're okay.

Advertisement
Advertise with NZME.
Advertisement
Advertise with NZME.

The main way a housing crash matters for an owner-occupier is if you're planning to sell the house and use the money for something else, like a retirement. If that's the case, trying to sell before the crash reaches its nadir might make sense.

Selling your assets in a crash sounds clever but is it easy? What if you finally decide/manage to sell the day before the market turns up again? The big question is: how far is it to the bottom of the market, both in percentage terms and in terms of time?

Big housing downturns tend not to be short-run blips like you might see in more liquid assets like shares. Check out the time from top to bottom in the case of Spain (six years) and the US (four years). In the case of a big crash you're potentially looking at several years of price decay. Once the downturn starts it is not necessarily too late to sell.

Of course the problem is you don't know if it will be a big or small housing downturn on the day you choose to sell.

Advertisement
Advertise with NZME.

SUPERANNUATION AND INVESTMENTS

Nothing is certain, of course, but there are plenty of reasons to think a house price crash could do serious damage to the sharemarket.

There are four main mechanisms for this.

1. The big banks make up a huge proportion of the Australian stockmarket. There's only four of them compared to 196 other stocks in the S&P ASX 200 but they account for 25 per cent per cent of the total value of the group.

The thing to know about our banks is they make their money lending on property. If property tanks their world-famous multi-billion dollar profits will look shaky and their share prices could wend their way southward.

Discover more

Retail

Jamie Oliver pins hopes on Kiwi soft drink

06 Aug 07:05 AM
Aged care

Retirement villages help displaced Remuera patients

08 Aug 08:15 PM

2. Retailers like Harvey Norman are also listed stocks. A booming housing market has been great for Harvey Norman as people fill their expensive homes with nice new stuff. If it all turns to poop not so many people will "Go Harvey Norman Go" and the sofas and dining settings will sit in their showrooms gathering dust.

3. People just buy more stuff when their house value goes up. This is called the wealth effect and it is highly likely to apply in reverse too. Falling wealth will crimp spending at all sort of Australian companies and could depress the sharemarket.

According to a survey by Deloitte and the ASX, 31 per cent of Australian adults own shares. They might consider selling up in a housing crash. But the other 69 per cent of us can't necessarily relax: superannuation is largely invested in Australian shares.

You might not choose exactly which shares your super is in but most super funds give you a few high-level options. Mine - a regular industry super fund - lets me put super into things like a mix of international shares and cash investments if I so choose. That would be one way to reduce exposure to the Australian property market.

If you think about it, your lifetime earnings are already highly exposed to the performance of the Australian economy. Investment advisers are always telling us to diversify. If you put your super in something that doesn't correlate with the health of the Australian economy, you've diversified away some of your risk, even if the housing market doesn't' do anything drastic.

CASH

In the absolute worst case scenario of major financial contagion, financial institutions collapse. What happens to your money?

Advertisement
Advertise with NZME.

The big banks have deposits guaranteed by the federal government. So do all Authorised Deposit-taking Institutions, like building societies and credit unions. Deposits up to A$250,000 are guaranteed even if the deposit-holder goes bust.

If you have more than A$250,000 (NZ$268,000) in cash (lucky you!) split it across two banks as the guarantee tops out at A$250,000 per bank.

But beware: not every entity where you can have an account is an Authorised Deposit taking Institution (ADI). If your cash is in an account held by an investment broker or an offset account at a non-bank lender, it could be at much higher risk if that entity goes broke.

(Of course if the government also collapses and we revert to an anarchic state we will all look back at this chat about the exact distinction of an authorised deposit taking institution and have a good laugh.)

YOUR JOB

If the housing market tanks and takes down the sharemarket, while financial institutions are shuffling into their graves with the federal government furiously bailing us out, it's hard to imagine the labour market would be looking too peachy.

What can an Aussie do when the unemployment rate spikes? Do we have to just sit here and take it?

Advertisement
Advertise with NZME.

One answer is to get a job that won't disappear in the bad times. If you work at a real estate agency, your job is probably less secure during a housing crash than if you work in a discount grocery retailer. In the really bad times, a government job - say working for Centrelink - is a strong defence. (They'll probably even hire a bunch of new people and make you their manager.)

There's also the passport option. Australia could turn to custard but that doesn't mean the rest of the world will do so too.

Many Aussies have dual citizenship (check to see if you do, you might be surprised) and have work rights in some other part of the world. Even without a foreign passport you might be able to swing a work visa to Canada or the UK if you're young. If things get really dire you could always consider NZ - Aussies can work there with no paperwork required. Mean as!

Save

    Share this article

Latest from Investment

Premium
Companies

$30 billion blast-off: Why Rocket Lab just hit an all-time high

08 Jul 03:33 AM
Premium
Opinion

Mary Holm: The ways to make your cash last in retirement

04 Jul 05:00 PM
Premium
Opinion

Nadine Higgins: Alternative ways to get on the property ladder

21 Jun 05:00 PM

From early mornings to easy living

sponsored
Advertisement
Advertise with NZME.

Latest from Investment

Premium
$30 billion blast-off: Why Rocket Lab just hit an all-time high

$30 billion blast-off: Why Rocket Lab just hit an all-time high

08 Jul 03:33 AM

Recent US political developments impact Rocket Lab, Infratil and Allbirds.

Premium
Mary Holm: The ways to make your cash last in retirement

Mary Holm: The ways to make your cash last in retirement

04 Jul 05:00 PM
Premium
Nadine Higgins: Alternative ways to get on the property ladder

Nadine Higgins: Alternative ways to get on the property ladder

21 Jun 05:00 PM
Premium
Mary Holm: Should I pay off my student loan or invest in an index fund?

Mary Holm: Should I pay off my student loan or invest in an index fund?

13 Jun 05:00 PM
Solar bat monitors uncover secrets of Auckland’s night sky
sponsored

Solar bat monitors uncover secrets of Auckland’s night sky

NZ Herald
  • About NZ Herald
  • Meet the journalists
  • Newsletters
  • Classifieds
  • Help & support
  • Contact us
  • House rules
  • Privacy Policy
  • Terms of use
  • Competition terms & conditions
  • Our use of AI
Subscriber Services
  • NZ Herald e-editions
  • Daily puzzles & quizzes
  • Manage your digital subscription
  • Manage your print subscription
  • Subscribe to the NZ Herald newspaper
  • Subscribe to Herald Premium
  • Gift a subscription
  • Subscriber FAQs
  • Subscription terms & conditions
  • Promotions and subscriber benefits
NZME Network
  • The New Zealand Herald
  • The Northland Age
  • The Northern Advocate
  • Waikato Herald
  • Bay of Plenty Times
  • Rotorua Daily Post
  • Hawke's Bay Today
  • Whanganui Chronicle
  • Viva
  • NZ Listener
  • Newstalk ZB
  • BusinessDesk
  • OneRoof
  • Driven Car Guide
  • iHeart Radio
  • Restaurant Hub
NZME
  • About NZME
  • NZME careers
  • Advertise with NZME
  • Digital self-service advertising
  • Book your classified ad
  • Photo sales
  • NZME Events
  • © Copyright 2025 NZME Publishing Limited
TOP