Andrew Dickens: Could the housing crisis be over?

As with all things lately we’re looking for any little clue that the old normal is coming back. But I don’t think it is.  

ASB lowered its house price inflation forecast for this year.  

Its Chief Economist Nick Tuffley reckons the pick up in sales has been sluggish and there is a lot of stock on the market.  

They believe prices will fall through the first half of this year, therefore, the bank has more than halved its house price growth forecast for 2025 to just 3.4% from 9%.  

That’s more in line with inflation than for a long time.  

In other words, buying a house at the moment is no longer the path to automatic capital gain.  

Faced with that house owners are more likely to stay put.  

Back in the old normal, churn was the name of the game. You’d buy and sell often to climb up through the property ladder.  

In today’s climate you’re more likely to stay in any house you own because a bird in the hand is worth two in the bush. 

Stability and security is the now the new normal.  

This is more in line with overseas models, where people stay in their houses longer, accepting their limitations and building a day-to-day life you can count on.  

Now we’ve been through boom-and-bust periods before.  

Prices have always come back - but what if they don’t this time?

Is that such a bad thing?  

People have often said our property fixation has been at the expense of real productivity growth.  

What will happen next is anyone’s guess.  

But the bank also points out another factor: immigration levels are staying stubbornly low.  

We’re not an attractive destination and that may be because of the image we’ve presented of ourselves as a basket place economy. 

It may be that the housing crisis is over and so welcome to a stable economy. It’s not a get rich quick paradise anymore, but it is still a nice place to live.   

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Episode Transcript

Speaker 1 (00:00):
These days, we're always looking for any little clue that
the old normal is coming back. It was the fifth
anniversary of the pandemic yesterday. I don't think the new
normal is coming back. So let's look at houses. Asb
lowered its house price inflation forecast for this year, it's
chief economist Nick Toughly reckons the pickup in sales has
been sluggish. He says there's a lot of stock on

(00:21):
the market. They believe prices will fall to the first
half of this year. Therefore, the bank has more than
halved its house price growth forecast for twenty twenty five
from just or to just three point four percent when
it used to be nine three point four percent. That's
the capital growth you can expect. That's more in line
with inflation than for a long time. In other words,

(00:42):
buying a house at the moment is no longer the
path to automatic capital gain. Question is how long will
it last. Anyway, face with the fact that it's just
three point four percent of house inflation, house owners are
more likely to stay put. And you remember, back in
the old normal, churn was the name of the game.
You'd often buy and sell a lot to climb up
through the property ladder. I went through five houses in

(01:04):
five years to get to a better place. In today's climate,
you're more likely to stay in any house you own
because a bird in the hand is worth two in
the bush. And you want some stability, because stability and
security is now the new normal. So this is why
we've got more stock. And this, you have to say,
is more in line with overseas models where people stay
in their houses for longer, accepting the limitations of the

(01:25):
market and building a day to day life that they
can count on. Now in New Zealand, we've been through
boom and bust periods before and prices have always come back.
It's sort of like, oh, they always come back. It'll
come back, mate, But what if they don't? Is that
such a bad thing. People have often said that our
property fixation has been at the expense of real productivity growth. Anyway,

(01:48):
what will happen next is anyone's guest. But I'll tell
you something else. The bank pointed out something that I
got worried about. Immigration levels are staying stubbornly low after
booming right after the pandemic. We are not in attractive
destination and maybe that's because of the image we're presented
of ourselves as a basketplace economy. So look, anyway, maybe

(02:08):
the housing crisis is over, maybe we're going to have
a stable economy. But I'll tell you one thing. It's
not a get rich quick paradise anymore right now, but
it is a nice place to live. For more from
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