No boom equals no gloom

The world has just experienced its greatest financial crisis since the 1930s, with international credit availability all but ceasing for a period late in 2008. Economies have had their deepest recessions in decades, unemployment rates have soared, and governments and central banks have responded with huge spending and bank support programmes.

In some countries house prices fell well over 30 per cent. Yet here in New Zealand, house prices only declined 11 per cent at their worst - not the 40 per cent falls some punters were still picking just a few months ago.

Understanding why prices did not collapse here is important, because it helps put into perspective the temporary nature of the current mild downward pressure on prices associated with more changes expected in the May 20 Budget.

In a nutshell, we did not have a house building boom in New Zealand, whereas countries such as the United States, Ireland and Spain did. In these countries, there are literally hundreds of thousands of houses sitting empty as councils and banks debate how best to demolish them. That is not the case in New Zealand, as evidenced by the Commerce Select Committee over 2007-08 investigating a shortage of affordable housing.

To read the full NZ Herald article, click here

Posted: 8 Mar 2010

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