Runaway NZ house prices expose Jacinda Ardern’s affordability lies

New Zealand Prime Minister, Jacinda Ardern, was elected in 2017 on a platform of fixing New Zealand’s chronic housing crisis.

However, Ardern’s Labour Party failed dismally on housing in its first term, failing to deliver on key election promises.

Labour’s promised ‘KiwiBuild’ program to build 100,000 public houses descended into a farce, with the government abandoning its building target and instead announcing a bunch of demand-side measures to inflate prices.

Labour also abandoned capital gains tax reforms and back-slid on the promise to abolish Auckland’s urban growth boundary and reform infrastructure financing.

As a result, New Zealand house prices have surged to a fresh record high and home ownership has plunged to a 70-year low:

In their latest Home Truths newsletter, Westpac economists are tipping New Zealand house prices to soar by 12.2% next year on the back of cratering mortgage rates:

The New Zealand housing market is currently red-hot. The REINZ House Price Index, seasonally adjusted by Westpac, showed a price increase of 3% in October, the biggest monthly increase since 1996. All of the usual indicator dials are now redlining, indicating ongoing rapid house price inflation for at least the coming few months. Market turnover is the highest it has been since 2007. The average number
of days taken to sell has dropped rapidly and is the lowest it has been since 2016. And stock available on a key real estate website has dropped sharply and is at an all-time low.

We think the current episode of house price inflation has a way to run yet. We are forecasting a peak of 16% annual house price inflation in June 2021, and a full-year increase over 2021 of 12.2%. House prices are being driven higher by low interest rates, and interest rates are set to stay low or fall further over the coming year. Meanwhile, other factors such as net migration and the economy are going to improve. So
our models point to ongoing rapid house price increases…

The driver of the current increase in house prices is low interest rates. Physical factors like net migration and housing supply cannot be the driver right now – net migration has been zero since April, and the construction sector is booming…

But over the whole of the past twenty years, and across the whole of New Zealand, physical supply/demand factors have played only a supporting role. Over twenty years, rents have risen 29% faster than inflation. But real house prices have risen 158%. Physical shortages cannot explain why the price-to-rent ratio has doubled, or why property investors are now willing to pay 30-40 years’ worth of rent to secure an investment property, whereas they used to pay only 15-20.

Falling interest rates do explain the observed blowout in price-to-rent ratios – people are now willing to accept lower yields when they invest in anything from shares to property (and when interest rates fall, owner occupiers find that the rent-or-buy decision favours buying)…

That said, in our view interest rates will rise in time. We are forecasting significant increases in fixed mortgage rates from early-2022 onwards. If that is correct, then rising mortgage rates will eventually cool the market. In fact, we expect mortgage rates will rise high enough to cause a period of declining house prices around the middle of the decade.

Jacinda Ardern is quickly learning that talking about “affordable housing” in opposition is easy, but delivering in government is an entirely different matter.

The reality is that nothing genuine ever happens on housing policy because “affordable housing” requires prices to fall. And nobody in the government nor home owners or the industry want this to happen. It’s exactly the same in Australia.

So instead we get “affordability” measures like first home buyer grants, which only succeed in artificially inflating demand and prices.

In the lead-up to October’s election, Jacinda Ardern once again vowed to tackle the nation’s housing crisis.

Then last month she told The AM Show that the Government would continue “looking for ways to encourage and support first home buyers”, which is code for more demand-side subsidies.

Worse, Ardern yesterday confirmed that “sustained” moderate rises in house prices is her government’s goal:

Prime Minister Jacinda Ardern says she would like to see small increases in houses prices, acknowledging most people “expect” the value of their most valuable asset to keep rising…

Asked by (see video below) whether “sustained moderation” of house prices was still the government’s goal, Ardern said: “Yes…

Asked to explain why a fall in prices would be bad, Ardern said: “What we’ve simply expressed here is that the growth that we’ve seen is unsustainable. So, if anything, it is much more sustainable to have those much smaller increases. I think people expect that you see that in the market”.

“What we also accept is that for most New Zealanders, their house is their most significant asset… A significant crash in the housing market – that impacts people’s most significant asset”…

“This gets to the heart of the issue of why so many New Zealanders turn to the housing market.”

Don’t expect anything concrete to happen. Ardern will deliver more hot air and hopium on the housing policy front. That’s what voters want, after all.

Unconventional Economist


  1. A comment of a local blog sums the situation up well:
    “Jacinda Ardern is a coward”
    And so she is. But in the same way that John key was (our ex-PM from the Right of politics as opposed to Arden’s Left).
    Both of them probably had good intentions in Opposition of ‘fixing the housing problem’, but once they took over office the established, unelected, overpaid group of Central Bankers, Public Servants and FIRE ‘industry’ participants scared the daylight out of them; telling them both that whatever it was they thought they were going to do would wreck the New Zealand economy and “You will forever be remembered as The One that did it!”
    Elections are pointless when the unelected underclass ( and, yes, that’s what they are – all of them ) dictate what direction democratically chosen policy initiatives are ‘allowed’ or not.
    Jacinda Ardern? Take a bow as the smiling coward that many, including me, now see you as.

    • It will be done for them.

      Western fiat currencies based on US ratings agency decrees will be finished within a few years and countries will be forced to work in blockchain digital currencies or gold backed – there is no way around it when every country on earth is simply printing infinitely.

      Asia is well and truly down that pathway and they KNOW that their productivity sets them miles ahead of western nations so implementing it is in their interests.

      The US uncontrolled printing is an acknowledgement that this is the reality and the last hoora as the petro-dollar implodes in the transition to renewables and the electric car world.

      NZ and Australia will be back to their third world positions of the 1970’s and prior.

      • Jumping jack flash

        Everything works so long as it is accounted for correctly.
        QE is a fine substitute for directly printing money and handing it out because it balances to zero.
        Nonproductive debt spending is favoured over printing and spending because it all accounts to zero. (or less than zero when interest is correctly accounted for, which it never actually is)

        This can all keep going for far longer than anyone imagines. We aren’t going to get uncontrolled hyperinflation, we will get carefully controlled hyperinflation, and if everyone does it at the same time its all fine and dandy.

        Median house prices to 10 million by 2050. Not inflation though because it doesn’t count.
        See how easy it is?

      • If you think Australia or NZ were 3rd world in 1970 and before you’ve never been to, or understand what, a 3rd world country is.

  2. Jumping jack flash

    Aaand she learns the hard way: Affordability isn’t the issue. She’s fighting windmills. Everyone gets let down when politicians jump on the affordability bandwagon, and the pollies get roasted.

    The problem is DEBT ELIGIBILITY. She should be going after the banks and rejigging the standards to get the debt out there.
    Everything is affordable if the bank gives you enough money to buy it with. Its win/win/win: The banks get their interest, the buyers get their houses, and the vendors get instantly and insanely rich beyond their wildest expectations.

    And there is no problems at all in doing it: The economy has been geared for the past 20 years to never repay debt, just to transfer it around and grow it. Repaying debt is not a problem any more. There is no risk. Repaying [nonproductive] debt is incredibly deflationary, it is to be avoided at all costs, unless you repay it with an even larger pile of someone else’s debt.

    So in the name of all that is holy, get the debt out there into the hands of the people who need it!!

    • Yup – and thats all that is happening.

      Currency has now lost all meaning with all countries engaging in infinite printing – global currency reset will be with us within a few short years and be based around a block chain system that forces currencies to be rated squarely against the countries productivity – the whole fiat system will be gone very soon and countries like Australia are completely screwed.

  3. Western inner city societies around the world have been transformed into wealthy land owners. The traditional left wing now has zero interest in workers rights, fairness, equality and more interest in their private health insurance, private schooling, retirement plans, overseas travel, etc.

    Hence the “left wing” has come to focus on issues such as race, environment, feminism and abandoned any interest in workers or the poor.

    They, the poor, are viewed with a deep almost vicious hatred. A serious level of disgust at the bogans, losers, unwashed, uneducated fascist misogynists – that is the view of the left on the workers and the poor.

    Its disgusting what the left wing is.

    The left wing is the absolute epitome of the Bourgeois so despised by the revolutionaries – history is so succinct. So perfect in its cyclical revolutions – the golden circle.

    Australia and New Zealand are entirely propped up by a completely rigged western financial system which has less than zero connection with free market forces – literally none. But that said we are headed straight for a global currency reset – there is absolutely no chance of any other outcome at this stage – and from that non-productive societies which live entirely off rigged FX and ratings through US federal reserve and treasury decrees with US ratings agencies bringing up the rear will be relegated to the South American Banana Republic status where they belong.

    Wont see out the next year.

    • Jumping jack flash

      Exactly. I dub it the New Economy. It is based on infinite debt growth, but it needs to grow at the correct rate otherwise we get deflation caused by the interest, stagnant wages and wage theft which is a poor substitute for actual inflation and wages growth resulting from the debt growing at the correct rate.

      If you view the economy through this lens, almost everything our esteemed economic masters have done over the last 20 years makes absolute perfect sense.

      • Except blow back.

        The problem with weaponizing things that should be left free, fair and equal like the SWIFT banking system is that it forces those who are being discriminated against to come up with their own system and / or one that is universally fair and not rigged.

        The global block chain currency system is coming and I suspect within the next few years and will absolutely CRUSH unproductive western countries who are living high on the fat of the old world and its institutional corruption.

        • “The global blockchain currency system is coming”
          Could be.
          And if there’s going to be one casualty; probably the first, it will be the ‘private’ blockchains that exist today.
          There’s no way ‘they’ are going to come out with a blockchain-based financial system and allow ‘us’ to have competition ones.

        • Jumping jack flash

          agree, and good luck.
          The system is ridiculous, but this is reality and the system they have carefully engineered. It has only worked properly once, for a very short time, but that isn’t stopping them from trying again. And again and again, and again.

    • Failed Baby BoomerMEMBER

      Hey Constable, I like your comments.
      Refreshingly rational and cutting to the bone – sort of like ‘ol mikemb.
      Where did you pop out from?

      • Fabian AlderseyMEMBER

        I thought it was the person who changes their name every month. The Chinese hypersonic quantum lasers person.

        • He is the Sinophile Boys Own adventure Chinese hypersonic weapons fiend. If he wasn’t dropping in a few comments about debased currencies, the usual term for him in these parts would be astroturfer or shill.

    • They, the poor, are viewed with a deep almost vicious hatred. A serious level of disgust at the bogans, losers, unwashed, uneducated fascist misogynists – that is the view of the left on the workers and the poor.

      These are the views espoused by author Thomas Frank in the U.S. about the urban liberal elite and the relationship with the working poor, mainly outside NYC, San Francisco, etc.

  4. Not surprisingly, the recently released NZ Ipsos Issues Monitor shows that in the past three months, New Zealanders major concern for housing has rocketed from 37% to way out top at 53% (a record) … in contrast to Australia at 16% …

    .Guess where Kiwis desperate for more affordable housing will be fleeing in 2021 ? …

    Ipsos NZ Issies Monitor – November 2020

    Housing Affordability Section – Stuff NZ

    • Welcome to the Jacinda Ardern Poverty Creation Programme … inflation is never growth …

      REINZ Report – October – released mid – November


      Median house prices across New Zealand increased by 19.8% from $605,000 in October 2019 to a new record median high of $725,000 in October 2020; and up from $689,000 in September this year (a 5.2% lift) according to the latest data from the Real Estate Institute of New Zealand (REINZ), source of the most complete and accurate real estate data in New Zealand.
      … structurally unsound housing markets, with strangled land supply and inappropriate infrastructure debt financing, means the Reserve Bank is unable to do its job … as Reserve Bank Governor Adrian Orr explained to TVNZs John Campbell recently …

      Record house prices not caused by Reserve Bank – Adrian Orr … TVNZ

  5. kiwikarynMEMBER

    She also campaigned on fixing the Resource Management Act and enabling development. Yet nothing on this front has happened. Meanwhile, her “urgent” priority was to legalise drug testing at festivals for summer.

  6. How about letting prices at least plateau and letting wages grow?

    Recent owner occupants don’t suffer a loss and affordability increases. Damn investors.


    Please, no more stories about young people buying houses … ANALYSIS … Hayden Donnell … Radio New Zealand

    Analysis: As the housing crisis continues to spiral out of control, Hayden Donnell calls for a moratorium on stories about young first home buyers … ( milking the bank of mum and dad for all its worth … while those without parental support generally do not have a hope of raising the grossly inflated deposit ) …

    … The fact is that houses cost about two times the median household income in the 1970s, and less than three times the median income in the 1980s.

    They now cost roughly seven times the median income across the country.

    In Auckland, where a house routinely makes more money per year than the average worker, that ratio is approaching 10. Demographia rates housing markets as severely unaffordable when the median multiple is more than 5.1.

    Since 1995, land prices have risen 73 percent faster than incomes. The country has a shortage of roughly 100,000 homes.

    These are real, structural factors which make it incredibly hard for many first home buyers to scrape together the money for a deposit in today’s market.

    Though media organisations do a good job of covering that crisis, their stories about young home buyers can serve to undermine that coverage. Whether deliberate or not, their message is that the housing crisis isn’t as bad as the reports say. They whisper to property-owning readers that the people getting antsy over their inability to buy a house are overreacting.

    That could feel like a slap in the face to the thousands of people who can’t save the $100,000 it now takes to put together a 10% deposit on even the median house in Auckland, … read and listen to more via hyperlink above …


      Wellington city’s median house price approaches $1 million – and there’s no sign of a slowdown … Rob Mitchell and Thomas Coughlan … Stuff NZ–and-theres-no-sign-of-a-slowdown

      Wellington’s housing market continues to set jaw-dropping new records, with properties being snapped up for astronomical prices in a matter of days, according to new real estate industry figures.

      There is no sign that the frenzied market will cool any time soon, agents warn, with one saying this may in fact turn out to be the “calm before the storm”.

      The new figures came as Reserve Bank Governor Adrian Orr said a new agency was needed to coordinate the response to the housing crisis and rebuffed Finance Minister Grant Robertson’s suggestion that it add house prices to its monetary policy remit.

      “Government agencies already have a wide range of levers that could be used to address housing issues,” Orr wrote in a letter to Robertson. But the “key issue” was making sure that those different levers were coordinated. … read more via hyperlink above …