Housing swallows New Zealand’s economy

Last month I presented the below chart showing how the value of Australia’s dwelling stock had hit $8.3 trillion in March 2021 – 4.2 times the size of Australia’s GDP:

Australian housing to GDP

Australian housing values dwarf the economy.

If you think that’s alarming, check out the below chart for New Zealand showing that the value of its housing stock has surged to 5.0 times the nation’s GDP:

NZ housing values to GDP

House values have risen $520 billion in just one year, the fastest jump in the shortest period.

From July 2020 to June 2021, total nominal annual GDP has been about $331 billion, a rise of $14 billion. During the same time, house values have risen to $1.65 trillion, a rise in the same year of $420 billion. In that year, the rise in house values will have exceeded the rise in economic activity in the country by an eye-popping 30 times.

This surge in New Zealand house prices has taken place on the back of an explosion in mortgage lending, while productive lending in businesses and agriculture shrunk:

NZ lending

Non-productive lending booms.

Clearly, Kiwis are betting it all on the house, with the nation’s property market effectively swallowing the economy.

Unconventional Economist
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