OK, I think I got it. Where I got confused is when you seemed to be saying that there is a disconnect between mortgage borrowing and the total value of housing stock, but that's not what you're saying at all.
Care to reference your methodology and data sources? I'm not really sure what you're claiming here. All mortgage lending is not "balanced" against house price values. Furthermore, we know that a mortgage comprises a deposit and a mortgage loan. The former is "saved into existence", while the latter is "lent into existence." The former is likely to be a product of one's labor, while the latter represents an asset to the bank by the creation of a contractual obligation (there is no corresponding deposit).
Local rentiers are a known problem – they’re likely the same fellas who suffered from irrational exuberance in 1987 – but their “share” of the nation’s GDP has reached too-big-to-fail proportions. And as I’ve mentioned prior, property owners and speculators are powerful enough to be a de facto upper house.
The problem is much bigger that what you describe as asset price bubbles have a strong correlation with consumer spending, commonly known as the "wealth effect." This is probably the reason why new car sales are booming in NZ at present. When bubbles burst, you can expect people to spend less on goods and services, which creates a vicious circle (look at the deflationary effects in Japan as people hold on to their cash for a rainy day). Consumer spending comprises approx 60% of NZ's GDP.
Is all the magic money offshore capital? We just don’t know. There is a lack of evidence of it coming from other parts inside the New Zealand economy, and given the hundreds of billions of dollars, a local source would be somewhat obvious. We also know that in other countries, with more internal housing markets, household debt does not just match the pattern of house value, the amounts add up to the same in gains. In New Zealand there is a 300 billion shortfall.
Well first of all, NZ banks are owned by Australian banks who use wholesale funding (basically money from outside NZ and Australia as a component of their mortgage lending base). Secondly, aggregate debt does not and should not equal house values. Plenty of people own their home outright and are at various stages of mortgage repayment. Thirdly, the start of the divergence between h’hold debt and house values in your graph coincides with the build up of debt through low interest rates promoted by the Fed Reserve post-tech bubble. The divergence is an indicator of the likelihood of the “bubble construct”.
Just working up some magic words ideas. Housing crisis – housing market- realestate bubble- um, snakes and ladders?
Bubble economics. Very few NZers are aware of it, including politicians from all parties.
View from across the ditch:
"Assuming National earn a fourth term, watch on as housing, infrastructure and living standards continue to get crush-loaded."
Yes, poor choice of word on my part. What I was trying to point out is that I don't think it is prudent to predict directional trends from these kind of data sets, unless there is a strong argument to do so.
Probably a bit deceptive to to base predictive "modelling" on something as crude as past movements across one sample set, unless there is a good assumption to support why.
sometimes feel that I’m living in some sort of a bubble…or an echo chamber..as nearly all of the people around me see that there absolutely needs to be change.
You are living in a bubble,,,a housing bubble without historical precedent. The problem is that nobody wants to label it as such in public. Unfortunately, change will probably occur, but likely outside the power of any govt initiative. The ramifications of housing bubbles are horrendous and attempts to aggressively promote them as an economic pillar results in warped, high-cost economic structures. Australia is a case in point. Since the GFC, average household weekly disposable income has grown by $27, while house prices have exploded and private debt has gone off the Richter.
Talking to people who own bars and the like, it’s often a similar thing here. People who aren’t lifers are more likely to have a positive attitude to the job, precisely because they wont be doing it forever.
Actually it's not explicitly stated, but many small businesses actually rely on "cheap labor" too, regardless if they're from emerging economies or from self-actualizing Europe. That is not unusual in high-cost bubble economies economies. Australia is no different.
It’s not only prices – and let’s be real, Auckland’s housing unaffordabilty has multiple causes – but supply. The numbers are striking. According to Statistcs NZ, Auckland’s new-dwellings shortfall versus poulation growth is running at around 5000 a year. The cumulative shortfall from 1012 to 2016 was more than 20,000.
Demand and supply side factors are all shaped by a political economy that is firmly fixated on rent seeking as the key driver of national wealth and consumer spending. Which is more harmful to house prices and infrastructure: immigration or a retail banking sector which is an extension of Australia’s massive mortgage factory that relies on implicit taxpayer guarantees and monetary frameworks that are ideal for our reliance on perpetual current account deficits and household debt?
Because you cannot quantify each independent variable and model the impact, then the media and the general populace will focus on what they think they intuitively feel is the driver. Personally, I feel that immigration is part of a bigger strategic objective: the transfer of savings from productive efforts in other parts of the world.
Rent seeking is pernicious, even though it is now the foundation of NZ’s national wealth and general aspiration. It is also a virus that afflicts political ideologies on both the right and the left. Economist Cameron Murray’s ‘Game of Mates’ addresses.
And NZ has struggled to monetise its local innovators who could reduce the nation’s dairy industry dependency, because most of the local investment capital has gone into the housing bubble instead of the productive sector.
Commercialize would be far more apt than monetize. But your point is important: The economy is geared towards rent seeking over productive activity.