Sometimes you need to be careful what you wish for. We all wanted cheaper housing, didn’t we? But now house prices have dipped again – in Auckland and Wellington, they’re now down 20-25% on the over-inflated market peak of early 2022 - we’re not so sure that it’s a good thing after all.
I’ve been taking more notice of house prices than usual. Mum and I sold her apartment on Wednesday because we’ve bought a place north of Auckland. We’re buying and selling in the same market, so that offers us some protection compared with those who bought when prices were high and now might have to sell when prices are lower.
We negotiated the property purchase, well under the rating valuation, after the auction process failed. We were the only interested party, and when you’re the only buyer, you dictate terms. The same thing happened with mum’s apartment; there was just one buyer in a market that the real estate agent described as “dire”.
I wonder whether that was overly positive. The person who bought mum’s apartment was the only bidder at a very quiet auction; he bought it, and would barely budge on price, after it was passed in. The other homes for auction on Wednesday were all passed in, too. It was all over quickly. Very, very quickly. How disappointing for everyone. Thousands of dollars spent on advertising campaigns, and no one has any confidence to turn up and bid. This is a new trough.
No one feels wealthy with falling house prices. They don’t spend; they hunker down and wait. So falling house prices are toxic for any economy, but our economy is exposed in a way many others are not. After all, we’ve been described as having an economy that it is really just a housing market with a dairy factory tacked on to the side. So the economy is far too exposed to the ups and downs of the housing market, and this down seems a particularly low one. Housing seemed a sure bet to me 20 years ago, but not now.
However, we’re hearing about “signs of life” and “green shoots”. Independent economist Tony Alexander says real estate agents report seeing more first-home buyers and more investors. Maybe this week’s announcement that overseas buyers with an “active investor plus” visa will be able to buy or build one home worth at least $5 million has helped. Then again, as Alexander says, the reported uptick may be seasonal because the real estate market tends to improve in spring and summer.
Prime Minister Christopher Luxon says the economic recovery is starting, and maybe it is at his place, but it doesn’t seem to have started to trickle down. It means Luxon continues to look ineffectual and out-of-touch -- our plonker-in-chief -- and quite possibly in charge of a one-term government.
So, here we are, having waited many months for improvement. Remember, we were told we just had to get through 2024 – “survive until 25”. Well, 2025 is nearly over, so perhaps lower interest rates will kick in and 2026 will be our year.
Right now, New Zealanders are scared to spend in case they stuff up -- or lose their jobs. Those lower interest rates have done nothing to encourage people out of their caves. If you ask me, the Reserve Bank has misread this situation for far too long. It artificially stalled the economy and plunged us into a deep recession. Through general incompetence, it’s kept us there, failing to turn the tide.
I’ve never seen New Zealand with such little business and consumer confidence; voters overwhelmingly say we are on the wrong track.
Should National replace Luxon or ride it out? Do nothing and it might just be a one-term government; make a change and it still might not be enough.
Everyone is waiting for someone else to start to move. And because all our fortunes and behaviours are linked to rising house prices, we’re locked in a downward spiral of fear. Instead of celebrating the fact falling house prices and lower interest rates should make it easier for first-time buyers, we’ve retreated to the panic room.
