1 00:00:00,200 --> 00:00:02,759 Speaker 1: Now, infametric says house prices need to fall at least 2 00:00:02,759 --> 00:00:05,440 Speaker 1: another sixteen percent to become anything like affordable. Now this 3 00:00:05,519 --> 00:00:07,920 Speaker 1: comes after the Housing Minister, Chris Bishop said last week 4 00:00:08,160 --> 00:00:10,200 Speaker 1: that house prices need to drop, which is a pretty 5 00:00:10,200 --> 00:00:13,080 Speaker 1: big thing for a housing minister to say. Already, according 6 00:00:13,080 --> 00:00:15,800 Speaker 1: to the Real Estate Institute, house prices are sixteen percent 7 00:00:15,840 --> 00:00:18,840 Speaker 1: below their twenty twenty one peak. Brad Olsen is Infametrics 8 00:00:18,840 --> 00:00:20,079 Speaker 1: principle economist. 9 00:00:19,640 --> 00:00:21,919 Speaker 2: And with us. Now, hey, Brad, good evening. 10 00:00:22,160 --> 00:00:23,960 Speaker 1: So you're talking about sixteen percent on top of this 11 00:00:24,040 --> 00:00:26,800 Speaker 1: sixteen percent we've already seen, which is what thirty two percent? 12 00:00:28,200 --> 00:00:30,319 Speaker 2: Yeah, that would be from that peak. I mean, to 13 00:00:30,320 --> 00:00:32,560 Speaker 2: be fair, we're comparing it to the most tippy top 14 00:00:32,600 --> 00:00:35,360 Speaker 2: of the mark, which was sort of stupid o'clock when 15 00:00:35,360 --> 00:00:37,239 Speaker 2: it comes to the housing market. Like no one, I 16 00:00:37,240 --> 00:00:39,920 Speaker 2: think seriously looked at that and went, this really huge 17 00:00:40,000 --> 00:00:42,599 Speaker 2: number on paper is the number that I should use 18 00:00:42,640 --> 00:00:44,480 Speaker 2: as my reference points for the rest of the time. 19 00:00:44,840 --> 00:00:48,519 Speaker 2: But it also shows that given how much house prices 20 00:00:48,560 --> 00:00:51,239 Speaker 2: have gone out of kelter with people's incomes, you're now 21 00:00:51,280 --> 00:00:54,400 Speaker 2: paying a substantially higher proportion of your income to serve 22 00:00:54,400 --> 00:00:56,680 Speaker 2: as a mortgage over time far more than it was 23 00:00:56,760 --> 00:00:58,720 Speaker 2: over the long term. That's why if you actually want 24 00:00:58,760 --> 00:01:00,880 Speaker 2: to talk about affordability, if you want to get serious 25 00:01:00,920 --> 00:01:04,200 Speaker 2: on that topic, you would have to see house prices full. 26 00:01:05,240 --> 00:01:06,240 Speaker 1: Do you think they're going to. 27 00:01:07,800 --> 00:01:09,360 Speaker 2: I don't think they'll fall at the moment. I mean 28 00:01:09,400 --> 00:01:12,200 Speaker 2: we're doing some better things in the right direction, and 29 00:01:12,240 --> 00:01:15,800 Speaker 2: we broadly expect to see house prices track sideways over 30 00:01:15,840 --> 00:01:17,959 Speaker 2: the next couple of years. In fact, I think when 31 00:01:18,000 --> 00:01:19,880 Speaker 2: we ran the lumbers last time, we thought that it 32 00:01:19,920 --> 00:01:22,880 Speaker 2: might be twenty twenty nine before we got house prices 33 00:01:22,920 --> 00:01:25,399 Speaker 2: back to their twenty twenty one peak. And of course 34 00:01:25,440 --> 00:01:28,200 Speaker 2: over that period you to be expecting that people's incomes 35 00:01:28,200 --> 00:01:30,319 Speaker 2: will increase over time, and that seems to be a 36 00:01:30,319 --> 00:01:32,480 Speaker 2: suggestion from a lot of people over how you get 37 00:01:32,480 --> 00:01:35,480 Speaker 2: better affordability is you sort of try and hold house 38 00:01:35,520 --> 00:01:37,959 Speaker 2: prices where they are. Because look, lets be clear and 39 00:01:38,000 --> 00:01:40,119 Speaker 2: hither I'm surprised you haven't taken me to task yet 40 00:01:40,120 --> 00:01:42,399 Speaker 2: on asking for house prices go down. I mean, that 41 00:01:42,560 --> 00:01:45,200 Speaker 2: is the biggest value that most households in New Zealand have, 42 00:01:45,480 --> 00:01:47,880 Speaker 2: and on these numbers, we're sort of suggesting it needs 43 00:01:47,880 --> 00:01:50,920 Speaker 2: to go lower. The more palatable option, and I sort 44 00:01:50,960 --> 00:01:53,480 Speaker 2: of understand that is that you hold try and hold 45 00:01:53,480 --> 00:01:55,440 Speaker 2: house prices where they are at the moment, and you 46 00:01:55,520 --> 00:01:58,160 Speaker 2: let incomes grow over time. But it would take a while, 47 00:01:58,440 --> 00:02:00,240 Speaker 2: and all the while you've got a bunch of young 48 00:02:00,280 --> 00:02:02,200 Speaker 2: kiwis who are going well at the moment, I'd be 49 00:02:02,240 --> 00:02:04,800 Speaker 2: coming back and having to spend and splurge a whole 50 00:02:04,800 --> 00:02:07,400 Speaker 2: bunch of money on a house that's worth far, far 51 00:02:07,480 --> 00:02:10,280 Speaker 2: too much relatively speaking. Is that really the future I want? 52 00:02:10,360 --> 00:02:12,639 Speaker 2: So it's a toss up over time looking at those 53 00:02:12,680 --> 00:02:14,080 Speaker 2: house prices and people's incomes. 54 00:02:14,160 --> 00:02:16,120 Speaker 1: I'm not taking you to task, Brad, because I think 55 00:02:16,160 --> 00:02:18,280 Speaker 1: that I think that we've all come to accept that 56 00:02:18,320 --> 00:02:20,120 Speaker 1: it cannot continue the way that it is right, And 57 00:02:20,160 --> 00:02:22,120 Speaker 1: I also think it's not going to fall by sixteen percent, 58 00:02:22,160 --> 00:02:25,520 Speaker 1: So I think you're just what you're talking about is theoretical, right. 59 00:02:25,720 --> 00:02:28,040 Speaker 1: But I'll tell you what I am worried about is 60 00:02:28,040 --> 00:02:29,440 Speaker 1: that the stuff that's going on at the moment, like 61 00:02:29,480 --> 00:02:31,400 Speaker 1: the debt to income ratios, is going to have an 62 00:02:31,400 --> 00:02:33,160 Speaker 1: effect on It's just not going to let the house 63 00:02:33,160 --> 00:02:35,480 Speaker 1: prices rise at the extent to which we have got 64 00:02:35,560 --> 00:02:39,120 Speaker 1: used to. Therefore, that adjustment in our heads and the 65 00:02:39,160 --> 00:02:41,160 Speaker 1: impact on the wealth effect I suspect is going to 66 00:02:41,160 --> 00:02:43,080 Speaker 1: be quite big economically, don't you think? 67 00:02:44,320 --> 00:02:47,440 Speaker 2: Oh? Absolutely? But I do wonder if that's almost sort 68 00:02:47,480 --> 00:02:49,720 Speaker 2: of a good thing for the future if we don't 69 00:02:49,720 --> 00:02:52,280 Speaker 2: have quite as much house price prices as with what 70 00:02:52,400 --> 00:02:54,760 Speaker 2: we've did into our expectations. You know, up until a 71 00:02:54,760 --> 00:02:57,280 Speaker 2: couple of years ago, house prices couldn't fall like that 72 00:02:57,440 --> 00:02:59,960 Speaker 2: was just barming. You could write, you know, you could 73 00:03:00,080 --> 00:03:02,040 Speaker 2: sort of sign your will on the idea that a 74 00:03:02,080 --> 00:03:04,840 Speaker 2: house price will go down, and now it has. And 75 00:03:04,880 --> 00:03:06,960 Speaker 2: I think that what I'm wonder is, with the lights 76 00:03:06,960 --> 00:03:10,400 Speaker 2: of the details that have come in the future, that 77 00:03:10,480 --> 00:03:12,720 Speaker 2: also means that if you're looking as an investor in 78 00:03:12,760 --> 00:03:15,240 Speaker 2: anyone else, when you put your money, maybe you don't 79 00:03:15,240 --> 00:03:17,240 Speaker 2: put it into a house. Maybe you think about trying 80 00:03:17,240 --> 00:03:19,640 Speaker 2: to get a better or turn elsewhere. Maybe that's how 81 00:03:19,680 --> 00:03:22,480 Speaker 2: we get those productivity to games over time. Maybe that's 82 00:03:22,480 --> 00:03:24,839 Speaker 2: how we get our better and higher incomes over time 83 00:03:24,840 --> 00:03:27,320 Speaker 2: that mean we can afford the houses. So this might 84 00:03:27,360 --> 00:03:30,639 Speaker 2: be sort of a not too bad sort of feedback 85 00:03:30,680 --> 00:03:33,079 Speaker 2: loop for the economy. But I think look, bottom line, 86 00:03:33,160 --> 00:03:35,240 Speaker 2: if it's a sixteen percent drop. Even if it's house 87 00:03:35,280 --> 00:03:38,040 Speaker 2: prices continuing at the same level. I think we probably 88 00:03:38,040 --> 00:03:41,000 Speaker 2: should be able to agree right everyone that house prices 89 00:03:41,080 --> 00:03:44,120 Speaker 2: continuing to go up at a faster rate than people's 90 00:03:44,120 --> 00:03:46,520 Speaker 2: incomes means that you will increasingly lock people out of 91 00:03:46,520 --> 00:03:49,240 Speaker 2: the housing market. That's certainly not the outcome that anyone wants. Y. 92 00:03:49,440 --> 00:03:51,360 Speaker 1: I take your point, So it's basically long term gain. 93 00:03:51,440 --> 00:03:53,200 Speaker 1: You take the medicine right now. Brad, thank you, has 94 00:03:53,200 --> 00:03:56,280 Speaker 1: always really appreciated this. Brad Olson in for Metrics Principle Economist. 95 00:03:56,800 --> 00:04:00,280 Speaker 2: For more from Hither Duplessy, Allen Drive, listen live News 96 00:04:00,320 --> 00:04:03,200 Speaker 2: Talk se B from four pm weekdays, or follow the 97 00:04:03,240 --> 00:04:04,840 Speaker 2: podcast on iHeartRadio.