Auckland housing set to crash?


The frightening graph below was produced by The Economist, which tracks global house prices and rates the level to which a market is overvalued. It concludes that NZ has the most overpriced market in the world.

Not only has the market risen faster than any other, but in the process, it became the most unaffordable market in the world, and the worst place to invest in property.

It uses two major measures to come to that conclusion: House price versus household income (its affordability measure) and house price versus rental income (its investment rating).

In all those ratings NZ makes even Canada look cheap, and Canada is not cheap.

Our commentators and politicians still dance around the inevitable conclusion that Auckland in particular is primed for the biggest crash in its history. We are repeatedly presented with the red herrings about immigration and lack of supply driving prices. They don’t do so alone. Easy money and loose credit terms drive prices to a bigger extent.

It is the bank actually buying the property and when risk rises it responds by turning off the taps and tightening its lending terms.

That’s already happening.


One thought on “Auckland housing set to crash?

  1. Excellent assessment of the situation. The market is driven by a desire for capital gain, which in investors such as Warren Buffett’s view is more akin to gambling than investing as the outcome and reward is not gauranteed.

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