Reserve Bank smashes New Zealand’s housing market and economy

Earlier this month, the Real Estate Institute of New Zealand (REINZ) released its June survey of licensed real estate agents, which showed a sharp reversal in the number of people attending auctions and open homes after the Reserve Bank began hiking interest rates:

Open home attendances

It also reported widespread price falls amid vanishing FOMO:

Price falls across New Zealand

Real estate agents also reported that rising mortgage rates are now by far the major concern of buyers:

Major concerns of buyers

Over the weekend, economist Tony Alexander released his monthly Spending Plans Survey, which reported that a record net 21% of survey respondents expect to cut their spending over the next 3 to six months:

Basically, the consumer spending crunch sought by the Reserve Bank to eventually rein in inflation is in place with more likely to come as more people experience higher debt servicing costs, the brain drain offshore worsens, house prices fall further, and house construction levels start falling.

Future spending

People are feeling the effects of rising debt servicing costs – but only those who have mortgages.

A record net 1.9% of respondents also said that they plan cutting back spending on a house which they would live in:

Net spending on dwellings

Whereas a net 10.3% of respondents also said that they plan spending less on investment property:

net spending on investment properties

In summary, these indicators suggest that buyer demand in the housing sector is weak and getting weaker as interest rates rise and the cost of living crisis bites. And this weakness is spreading to the broader economy via a contraction in household consumption spending.

The situation will only worsen if the Reserve Bank follows through with its forward guidance and hikes the official cash rate to 3.9% by September 2023.

Unconventional Economist


  1. 1y1y forward is now around 4.50. If that eventuates and spreads to mortgages normalise, we are going to 6.7% for one year fixed rates. At which point we see delinquencies go through the roof and first buyers will start to default as unemployment rises.

    Crazy stuff. Domestic inflation in NZ is set to crater along with the economy. Consumer spending is going to get torched.

    • That, unfortunately is the aim of the hikes. They need to torch consumption demand. It is the only lever they got. And those telling you that it is a supply side issue which demand destruction won’t or can’t solve are conveniently ignoring that the agg supply and agg demand curves MEET eventually.
      Was it micro or macro econ 101 where we learnt that?

        • There is only so much supply being produced, so demand must fall to match supply, the only question is how that happens:

          *Hiking rates so people have less money to spend
          *Letting inflation rise so people’s money buys less stuff
          *Implementing price controls so there are shortages

          Choose your poison? Because at the end of the day less supply means people must consume less stuff. No way around it.

    • And the alternative is to support the status quo, and return to what we’ve had for the last 20 years?
      That’s the dilemma.
      What we’ve had couldn’t carry us forward indefinitely, so it had to change at some stage.
      I guess that stage is now – and yes, it’s going to hurt. But it was always going to.

        • – Nonsense. Central Banks (RBNZ, RBA, FED, ECB, BoE, etc. etc.) FOLLOW what a force called “Mr. Market” dictates. And Mr. Market has pushed rates higher all around the world.
          – “Fight Inflation” ???? Give me a break ……………………
          – I expect central banks to start cutting rates in the 2nd half of the year. But by then the damage has already been done.
          – The most damagiing thing is the growing gap between (shrinking ??) income on the one hand and expenses on the other hand.

      • Hugh PavletichMEMBER

        The politicians have spent the past near two decades lying through their teeth as they just kicked the can down the road on these serious issues Leith.

        Belatedly … the RBNZ has to put a stop to this unnecessary inflationary nonsense.

        The Ipsos issues surveys have been very clear for a long time …

        17th Ipsos NZ Issues Monitor – June 2022

        National most trusted to solve inflation as cost of living now the top issue facing New Zealanders – Ipsos research … Mark Quinlivan … Newshub

        Why National is winning … Toby Manhire … The Spinoff

        • Hugh PavletichMEMBER

          It’s the interest rates, stupid – house prices and interest rates create political pain … Dileepa Fonseka OPINION … Stuff New Zealand …


          Pavletich comment on thread (in moderation) …

          People are encouraged to go directly to the Macrobusiness Australia website ( to read Leith van Onsolens flood of writings on the failings of the Ardern government.

          He has been highly critical for a very long time.

          To illustrate … check out his article of 9 June illustrating the latest Roy Morgan poll ‘Voters raise pitchforks against Jacinda Ardern’ which concludes with …

          ‘The broader issue facing Ardern is that she is no longer trusted after breaking multiple election pledges around housing and immigration.’

          The latest Ipsos NZ Issues Monitor is very clear that cost of living and house price inflation are by far and away the major concern of New Zealander’s

      • This is one of the problems of allowing your economy to be too fully financialised…….a much better way was the way Harold Holt used to do it for Menzies. When the economy got a head of steam up they used to put 5% onto the income tax and when it slowed down they took the 5% off. Now we put up the costs so that the rentiers get the flow not the public purse.

  2. Hugh PavletichMEMBER

    Great news on the building products supply front !

    … An essential read …

    ‘Unsustainable’: Shareholders ask Fletcher to explain Gib crisis … Daniel Smith … Stuff NZ
    … h/t MB …

    KiwiSaver provider Simplicity and the NZ Shareholders Association will meet with Fletcher Building this Friday, to ask for answers to the Gib supply crisis.

    Last week, Simplicity Living, the housing development arm of the company, cancelled all contracts to purchase Gib from Fletcher and instead imported foreign plasterboard because, it said, it was cheaper and quicker.

    Simplicity offered to share details on how to import Gib substitutes with other businesses and said it had received more than 60 requests for information from both small and large developers. … read more via hyperlink above …
    … following recent important article …

    Simplicity blasts Fletcher Building for lack of Gib … Daniel Smith … Stuff NZ

    • – In the last say 20 to 30 years developments in the property market(s) (plural) have been the driver of growing / declining economic growth. And that applies to MANY countries. Incl. the US, Canada, the UK, Norway, New Zealand, Australia, Japan, etc. etc. etc. …………….

  3. When the former chief economist ( which should in itself be concerning) for BNZ , puts out surveys aimed at real estate agents.I would take it all with a grain of salt Renowned for his amusing ability to quantify Auckland’s housing shortage .

  4. Hugh PavletichMEMBER

    Failed Ports of Auckland automation project likely to have cost $500m, councillor says … Geraden Cann … Stuff NZ

    … according to a recently released World Bank / S&P Global Report of the 370 Global Ports Performance, New Zealands ports are some of the most inefficient in the world …

    The 370 Global Container Port Performance Index 2021 … World Bank / S&P Clobal

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