1 00:00:07,133 --> 00:00:10,453 Speaker 1: You're listening to the Saturday Morning with Jack team podcast 2 00:00:10,573 --> 00:00:11,453 Speaker 1: from News Talks. 3 00:00:11,453 --> 00:00:14,893 Speaker 2: That'd be our personal finance expert. Every night. We'll have 4 00:00:15,013 --> 00:00:17,653 Speaker 2: all of the numbers. I'm sure at hand he is 5 00:00:17,733 --> 00:00:21,813 Speaker 2: comparing New Zealand's property market with the biggest property crashes 6 00:00:21,813 --> 00:00:25,013 Speaker 2: in world history. This morning, calder ed, great to be here, Jack. 7 00:00:25,093 --> 00:00:27,693 Speaker 2: We all know about the downturn. It's funny how these 8 00:00:27,733 --> 00:00:29,373 Speaker 2: things sort of go, isn't it. You know, just a 9 00:00:29,413 --> 00:00:31,613 Speaker 2: couple of years ago we were talking about the crazy 10 00:00:31,733 --> 00:00:34,573 Speaker 2: surge in the property market. But just how significant is 11 00:00:34,613 --> 00:00:35,293 Speaker 2: this downturn? 12 00:00:36,613 --> 00:00:40,173 Speaker 1: Well, in historical contexts, it's big for New Zealand. This 13 00:00:40,213 --> 00:00:43,653 Speaker 1: is in fact the largest modern property downturn we've had. 14 00:00:43,693 --> 00:00:47,053 Speaker 1: Property prices fell about eighteen percent across the whole country 15 00:00:47,373 --> 00:00:50,293 Speaker 1: more well into the twenty percents for Auckland and Wellington, 16 00:00:50,373 --> 00:00:53,933 Speaker 1: got pretty close to thirty percent down in some areas. 17 00:00:54,373 --> 00:00:56,413 Speaker 1: But what woult it to do today was talk about, well, 18 00:00:56,413 --> 00:01:01,213 Speaker 1: how does that compare to worldwide downturns. And what's interesting 19 00:01:01,333 --> 00:01:04,493 Speaker 1: is I've got three of the largest property price downturns 20 00:01:04,533 --> 00:01:07,013 Speaker 1: I've been able to find, and one of the largest 21 00:01:07,053 --> 00:01:10,573 Speaker 1: ones in modern history was actually over in Ireland and 22 00:01:10,773 --> 00:01:13,853 Speaker 1: was relatively recent. And what you tend to see with 23 00:01:13,973 --> 00:01:17,693 Speaker 1: all of the downturns i'll talk about today is the 24 00:01:17,733 --> 00:01:22,093 Speaker 1: massive property price crashes are preceded by massive property booms. 25 00:01:22,133 --> 00:01:24,253 Speaker 1: And we know all about that here at news Held 26 00:01:24,293 --> 00:01:27,613 Speaker 1: with our COVID fueled boom before we saw the eventual 27 00:01:27,693 --> 00:01:30,893 Speaker 1: drop off, But over at Ireland it was even more extreme. 28 00:01:31,093 --> 00:01:35,853 Speaker 1: Property prices rose two hundred and seventy percent in just 29 00:01:36,293 --> 00:01:42,253 Speaker 1: ten years before the GFC came along, and then property 30 00:01:42,253 --> 00:01:46,933 Speaker 1: prices fell fifty six percent. Now that's like saying, imagine 31 00:01:47,093 --> 00:01:50,293 Speaker 1: owning a five hundred thousand dollars house and then all 32 00:01:50,333 --> 00:01:53,413 Speaker 1: of a sudden it's worth about two hundred and twenty 33 00:01:53,533 --> 00:01:55,893 Speaker 1: k and you have two hundred and eighty grand. 34 00:01:56,253 --> 00:01:59,613 Speaker 2: Yeah that is I mean, that is absolutely massive, and 35 00:02:00,293 --> 00:02:03,213 Speaker 2: I suppose you know there there are if you're thinking 36 00:02:03,253 --> 00:02:05,333 Speaker 2: about it strictly in financial terms, there would have been 37 00:02:05,333 --> 00:02:08,693 Speaker 2: some big winners and some massive losers with that downturn. 38 00:02:08,773 --> 00:02:11,733 Speaker 2: But that's Ireland. Japan had one as well well. 39 00:02:11,813 --> 00:02:14,813 Speaker 1: Japan is even more insane. So between I'm going to 40 00:02:14,813 --> 00:02:16,453 Speaker 1: teach you a new word to that, Jack. So between 41 00:02:16,573 --> 00:02:20,773 Speaker 1: nineteen sixty and nineteen ninety, property prices in Japan try 42 00:02:20,853 --> 00:02:24,613 Speaker 1: good tupled, Now that's that's fancy word to say. They 43 00:02:24,653 --> 00:02:28,853 Speaker 1: went up thirty times well times fire nineteen ninety compared 44 00:02:28,853 --> 00:02:31,333 Speaker 1: to nineteen ninety sixes. Here's an interesting fact for you. 45 00:02:31,453 --> 00:02:34,533 Speaker 1: At the time, it was said that the land underneath 46 00:02:34,573 --> 00:02:38,413 Speaker 1: the Imperial Palace in Tokyo was worth more than all 47 00:02:38,493 --> 00:02:42,093 Speaker 1: of the real estate combined in the US state of California. 48 00:02:42,493 --> 00:02:44,653 Speaker 2: I mean, that's obviously absurd. 49 00:02:45,133 --> 00:02:49,013 Speaker 1: Yeah, insane. And then property prices fell to petty on 50 00:02:49,013 --> 00:02:51,893 Speaker 1: where you were in Japan, sixty to eighty percent. But 51 00:02:52,133 --> 00:02:56,653 Speaker 1: here is the really interesting thing. Since property prices have fallen, 52 00:02:56,973 --> 00:03:00,173 Speaker 1: they have actually not yet recovered. So if you bought 53 00:03:00,173 --> 00:03:02,413 Speaker 1: a property in nineteen ninety one at the height of 54 00:03:02,453 --> 00:03:05,933 Speaker 1: the Japanese market, thirty three years later, it could still 55 00:03:06,013 --> 00:03:09,173 Speaker 1: be twenty three percent down on what you paid for it. 56 00:03:09,373 --> 00:03:15,453 Speaker 2: That's interesting is that because Japan has a relatively stagnant population, 57 00:03:15,573 --> 00:03:17,653 Speaker 2: because they haven't had the massive population growth the lots 58 00:03:17,653 --> 00:03:18,573 Speaker 2: of other countries have had. 59 00:03:19,093 --> 00:03:21,293 Speaker 1: Yeah, that in the aging population. And then on top 60 00:03:21,333 --> 00:03:23,773 Speaker 1: of that, you've also got a really interesting factor in 61 00:03:23,853 --> 00:03:26,733 Speaker 1: Japan where a lot of it is highly urbanized. So 62 00:03:27,053 --> 00:03:29,853 Speaker 1: if you look at an individual city like Tokyo, property 63 00:03:29,853 --> 00:03:32,253 Speaker 1: prices can still be really high and in many cases 64 00:03:32,293 --> 00:03:35,013 Speaker 1: will have recovered. But if we look at the overall 65 00:03:35,173 --> 00:03:39,093 Speaker 1: situation in Japan, house prices are still down at that 66 00:03:39,293 --> 00:03:41,573 Speaker 1: national level. So sometimes, just like we have to in 67 00:03:41,613 --> 00:03:44,933 Speaker 1: New Zealand, you can split out the cities from the 68 00:03:45,573 --> 00:03:47,973 Speaker 1: country as a whole. And actually, in our case, the 69 00:03:47,973 --> 00:03:51,653 Speaker 1: cities have performed worse compared to cheap areas in the 70 00:03:51,653 --> 00:03:55,533 Speaker 1: country at large. But the largest property downtown is an 71 00:03:55,533 --> 00:03:58,373 Speaker 1: interesting one. And I had to go way back in 72 00:03:58,413 --> 00:04:01,333 Speaker 1: time to the thirteen hundreds, and it's the Black Death 73 00:04:02,133 --> 00:04:05,853 Speaker 1: because the plague. The plague killed about half of Europe's population. 74 00:04:06,013 --> 00:04:07,733 Speaker 2: That'll do that'll do it. 75 00:04:08,053 --> 00:04:08,813 Speaker 1: You're laughing at that. 76 00:04:09,253 --> 00:04:12,533 Speaker 2: Well, I'm not laughing at the plague, I'm you know, 77 00:04:12,973 --> 00:04:15,773 Speaker 2: but I mean, yes, it's probably the least of your concerns, 78 00:04:15,813 --> 00:04:17,653 Speaker 2: isn't it. If your portfolio is taking a bit of 79 00:04:17,653 --> 00:04:20,733 Speaker 2: a blood and half the population has been wiped out. 80 00:04:21,093 --> 00:04:23,493 Speaker 1: Oh yeah, well, that'll do it, won't it did? And 81 00:04:23,853 --> 00:04:27,533 Speaker 1: property prices fellon estimated seventy to eighty percent. Now I'd 82 00:04:27,573 --> 00:04:31,813 Speaker 1: say estimated because back then they were more interested in 83 00:04:32,053 --> 00:04:36,013 Speaker 1: staying alive compared to keeping good property priced data records 84 00:04:36,013 --> 00:04:38,973 Speaker 1: for economics seven hundred years later. But those are the 85 00:04:39,053 --> 00:04:42,693 Speaker 1: three largest property downturns I could find, and if anything, 86 00:04:42,733 --> 00:04:46,053 Speaker 1: hopefully that gives some comfort to New Zealanders when they say, 87 00:04:46,093 --> 00:04:49,133 Speaker 1: do you know what our downturn was severe in terms 88 00:04:49,173 --> 00:04:52,293 Speaker 1: of property price and property price history we've had in 89 00:04:52,333 --> 00:04:55,333 Speaker 1: New Zealand, But it's quite small compared to some of 90 00:04:55,333 --> 00:04:57,173 Speaker 1: the largest ones we've seen around the world. 91 00:04:57,293 --> 00:05:00,053 Speaker 2: Yeah, right, okay here, So are there any lessons apart 92 00:05:00,093 --> 00:05:04,413 Speaker 2: from avoiding another black death that we can take from this? Well? 93 00:05:04,413 --> 00:05:07,453 Speaker 1: I think the big thing is that the signs that 94 00:05:07,613 --> 00:05:11,493 Speaker 1: a property market could get to bubbly is rapid price increases, 95 00:05:11,933 --> 00:05:15,293 Speaker 1: easy lending, and building booms. Those are the three big 96 00:05:15,333 --> 00:05:17,893 Speaker 1: things we saw in Ireland and are probably the most 97 00:05:18,573 --> 00:05:22,093 Speaker 1: similar to us over here in New Zealand. Easy lending, 98 00:05:22,093 --> 00:05:24,853 Speaker 1: building booms, and then rapid house price rises. We can 99 00:05:24,933 --> 00:05:27,693 Speaker 1: see a lot of that in New Zealand's experience in 100 00:05:27,773 --> 00:05:30,493 Speaker 1: twenty twenty twenty twenty one, property prices were up in 101 00:05:30,493 --> 00:05:33,613 Speaker 1: some cases well over forty percent. We had a lot 102 00:05:33,653 --> 00:05:36,813 Speaker 1: of boo building, and that building takes a while for 103 00:05:36,813 --> 00:05:39,693 Speaker 1: the houses to actually come onto the market, so sometimes 104 00:05:39,853 --> 00:05:44,613 Speaker 1: developers will start knocking them up during rapid price rises, 105 00:05:44,893 --> 00:05:48,173 Speaker 1: and then once they finally built, the market's going the 106 00:05:48,213 --> 00:05:50,293 Speaker 1: other way, and you've got the sextra supply coming on 107 00:05:50,573 --> 00:05:52,813 Speaker 1: and then the lending tap getting turned off. And it's 108 00:05:52,853 --> 00:05:55,893 Speaker 1: really interesting that house prices in New Zealand started falling 109 00:05:56,333 --> 00:05:59,333 Speaker 1: the month that the Triple CFA, which was a tough 110 00:05:59,453 --> 00:06:01,733 Speaker 1: lending rule that got passed back in twenty twenty one. 111 00:06:01,933 --> 00:06:04,333 Speaker 1: It was the same month that law came in the 112 00:06:04,413 --> 00:06:08,373 Speaker 1: lending tap got turned off. Our Property Priced Down Tune started. 113 00:06:08,853 --> 00:06:10,613 Speaker 2: Hey, thanks so much, you'd really appreciate it. 114 00:06:10,613 --> 00:06:14,533 Speaker 1: As always, Eve McKnight, Thanks Jake for more from Saturday 115 00:06:14,573 --> 00:06:17,413 Speaker 1: Morning with Jack Tame. Listen live to News Talks 't 116 00:06:17,453 --> 00:06:21,333 Speaker 1: B from nine am Saturday, or follow the podcast on iHeartRadio.