New Zealand housing faces biggest ever crash

ANZ Economics has released its Business Outlook survey for July, which shows that both business activity and confidence have tanked:

New Zealand business activity and confidence

Business activity and confidence have crashed.

The result follows the collapse in both consumer and government confidence to near record lows in June:

New Zealand consumer and government confidence

New Zealand consumer and government confidence has also collapsed.

The outlook is especially dire for New Zealand’s housing market, with ANZ recording that “residential construction intentions plummeted again to a fresh record low”:

Residential construction intentions

Residential construction intentions point to recession.

ANZ notes that “housing consents are now dropping” and that the “ANZBO data suggests consents may have a lot further to fall yet”. It also explains that “the fall in early 2020 was due to lockdown” but that “it’s difficult to imagine what would lead to such a rapid bounce this time”.

Therefore, construction intentions are pointing to a sharp slowdown in building activity, which will weigh heavily on New Zealand’s economy over coming quarters.

Arguably, the bigger worry for the economy relates to house prices, which have already fallen sharply in response to the Reserve Bank of New Zealand’s (RBNZ) aggressive interest rate hikes.

The REINZ’s latest House Price Index – the preferred measure of the RBNZ – recorded a steep 5.4% decline over the June quarter, with all major urban areas registering quarterly falls. The Trade Me property index similarly posted a record a 1.9% monthly fall in June amid “skyrocketing supply”.

Household consumption is the major driver of New Zealand’s economic growth. Therefore, the sharp lift in mortgage rates, combined with plunging house prices, suggests household consumption will soon fall sharply, presenting further stiff headwinds for the economy.

The RBNZ this month stated that it would continue raising interest rates to fight inflation, which hit a 32-year high 7.3% over the June quarter.

If the RBNZ follows through with its guidance, New Zealand housing will face its biggest ever crash, which also risks throwing the economy into a painful recession.

Unconventional Economist
Latest posts by Unconventional Economist (see all)


  1. call me ArtieMEMBER

    You can’t explode a bubble without creating the bubble first. If they had taken small, early pain instead of kicking the can down the road for 10 years, they would not have this disaster brewing now. Ditto all developed economies. It’s been coming since the GFC stimulus-driven recovery. Short-term thinking and no appetite for hard decisions
    EDIT: The inevitable result of MMT unfettered by balancing fiscal and macro policy constraints

    • Exactly correct. This is so obvious & so predictable! The last 10 to 15 years & probably longer has been full of economic bullsh!t. The politicians & TBH 100% of the punters didn’t want to know about the consequences; they might be here now!

  2. File under when investors flee to more lucrative paddocks …

    And that is the rub … some wanted society administrated by investors [animal spirits], because they were the smartest people on the orb, EHM said so, all economic statism was a road[tm] to serfdom and a totalitarian gateway too ev’bal communism, so some now wobble on about how investors pull the plug just at the whiff of not getting the expected/desired return on ***Their [earned] Capital*** and in the blink of any eye entire society gets whip sawed into the pit …

  3. Firstly New Zealand (and Australia) are countries that still offer a lifestyle and economies the majority of nations do not.
    The ANZ Business Confidence has nil correlation with house prices., but after a day of ever desperate forecasts for the Australian housing market, anything to show a similar outlook for the New Zealand market was needed before the weekend.
    New Zealand has a structural shortage of housing,, significantly worse than Australia , building fewer will not improve the situation. ( Ireland is an example ) House sales may collapse, prices will not.
    Importantly, the NZD is bottoming against the USD, it will strengthen significantly over the coming five years.

  4. House prices are determined by supply and demand in the housing market. House sales are very weak – we see this in the REINZ and auction clearance data – leading to rising inventory of unsold houses and lengthening days to sell. Both inventory and days to sell are highly correlated to house prices and both suggest prices will decline further.

    As for the housing shortage argument, much of that depends on what starting point you assume is equilibrium, or what assumption you make for the equilibrium number of occupiers per house. But ignoring that, what we see is that supply>demand for two years now and given net outflows of migrants and weak population growth and a still strong pipe of completions to come, thats going to remain the case for at least another year.

    Sure, longer term, consents fall – compounding the recession – and the government can open the immigration tap, but NZ isn’t perceived as desirable like it once was, Chinese can’t easily leave China etc… and foreigners are right now net sellers anyway.

    All roads point to weaker prices.

  5. Hugh PavletichMEMBER

    Kiwis cashing up: Goodbye Auckland house prices, g’day Australia … Nikki Preston … OneRoof / New Zealand Herald

    New Zealand lost 11,000 people in a year, Stats NZ says … Susan Edmunds … Stuff New Zealand

    Desirable tenants become scarcer as ‘accidental landlords’ add to rental glut … Geraden Cann … Stuff New Zealand

    Employers and Manufacturers Association says NZ’s high cost of living, housing putting overseas workers off … Ireland Hendry-Tennent … Newshub (regrettably VIDEO not available outside New Zealand)

  6. Hugh PavletichMEMBER

    Housing crisis: One home across the decades shows how ‘make your own lunch’ and ‘save hard’ won’t cut it … Joanna Davis … Stuff NZ

    Migrant doctors struggling to find work despite healthcare staff shortages … Mildred Armah … Stuff NZ

    The good, the bad and the weird: Wellington council report cards in … Tom Hunt … Stuff NZ

    I was ‘never ever’ going to be able to buy in Auckland. So I moved … Joanna Davis … Stuff NZ

  7. Hugh PavletichMEMBER

    China update … guess who New Zealand’s biggest trading partner is ?…

    China Mulls Seizing Builders’ Idle Land to Fund Frozen Projects … Bloomberg
    … behind paywall … google search for possible open reprint …

    China is considering a plan to seize undeveloped land from distressed real estate companies, using it to help finance the completion of stalled housing projects that have sparked mortgage boycotts across the country, according to people familiar with the matter.

    The proposal, which is still under discussion and could change, would take advantage of Chinese laws allowing local governments to wrest back control of land sold to real estate companies if it remains undeveloped after two years, without compensation. That would give authorities more leeway to direct funds toward uncompleted homes, potentially to the detriment of creditors who would lose claims on some of developers’ most valuable assets.

    While officials would have bandwidth to adjust the process to suit local conditions, a typical scenario would involve seizing land from a distressed developer and giving it to a healthier rival, which would in turn provide funding to complete the distressed developer’s stalled projects, the people said. The government could also rezone the seized land in some cases to increase its value, the people added, asking not to be named discussing private information. …

    … China’s top 100 developers owned land parcels valued at 42.5 trillion yuan ($6.3 trillion) at the end of last year, according to China Real Estate Information Corp. Many of them borrowed heavily to buy the land, in hopes that prices would continue rising. … read more via hyperlink above …

    Why Are People Across China Refusing to Pay Their Mortgages? What to Know So Far … Bloomberg
    Youth unemployment China

    New data released on Saturday by China’s National Bureau of Statistics shows that youth unemployment hit 19.3 percent in June. It’s the highest level since the data was first made public four years ago; back then, the figure was as low as 9.6 percent.18/07/2022

    China jobs: youth unemployment hits record high in June – nearly 1 in 5 young people out of work … South China Morning Post

    New Zealand’s Top Trading Partners … Worlds Top Ecports Com's%20Top%20Trade%20Partners&text=From%202020%20to%202021%2C%20the,the%20Netherlands%20(up%2024.7%25).

  8. Hugh PavletichMEMBER

    New Zealand is fully reopening to the world, but how prepared are we? … Kelly Dennett … Stuff NZ

    From 11:59pm on Sunday, all tourists will be welcomed back to New Zealand. Economists think they might be our best shot at getting out of a recession, but operators say tourism’s recovery will be slow. Kelly Dennett reports.

    When the Pacific Explorer docks at Auckland in two weeks Kevin O’Sullivan will be there welcoming passengers.

    The New Zealand Cruise Association chief executive admits that in March 2020 – the last time cruise ships docked in New Zealand – he was calling the border closures a “short-term pause”.

    “I had no expectation I would be sitting here in July 2022 waiting for the first ship to come back. It has been difficult, quite depressing at times, but onwards and upwards. I’m really looking forward to [welcoming the ships back].” … read more via hyperlink above …
    Daily Passenger arrivals and departures – NZ Customs Service

  9. Hugh PavletichMEMBER

    Buyers’ market spreads: Number of homes for sale doubles … Susan Edmunds … Stuff NZ

    New data from property listings website indicates that, while many parts of the country are now a “buyer’s market”, there’s no sign of a looming housing market crash. reports that the number of homes available for sale has increased steadily since mid last year.

    In July last year, there were 12,684 on the market. At the end of July this year, that had lifted to 26,358.

    Eleven regions had at least twice the housing stock this year compared to last, including Hawkes Bay, Nelson and Bays, Wellington, Bay of Plenty, Waikato, Central North Island, Manawatu/Whanganui, Wairarapa and Northland. … read more via hyperlink above …

  10. Hugh PavletichMEMBER

    The number of homes for sale has more than doubled year-on-year, with the national average asking price declining by $87k from its peak … Greg Ninness … Interest Co NZ

    Buyers are now fully in control of the housing market as the number of homes available for sale doubles compared to a year ago, asking prices continue to tumble and the number of new listings remains above pre-pandemic levels, according to property website

    “The market has started to shift,” spokesperson Vanessa Williams said.

    “We’ve seen a record number of consents form councils to build new homes and buyers’ FOMO (fear of missing out) decreasing.

    “The scales have tipped.

    “Buyers now have the edge,” she said.

    At the end of July had 26,358 residential properties available for sale, more than double ( 108%) the number it had available at the end of July last year.

    The meant the number of properties available for sale was at its highest level for the time of year since 2015. … read more via hyperlink above …

    The Perfect Storm: Health And Housing Crisis Will See More New Zealanders Struggle To Access Aged Care Services … Aged Care Matters … Scoop NZ News

Leave a reply

You must be logged in to post a comment. Log in now