Strange how the RBNZ do not think there is a problem with house price/ rents inflation now.
According to the RBNZ about 4 years ago, house inflation was going to ruin the economy etc and they put interest rates up. I bought a house at auction about 4 years ago and the auction was very subdued compared to now.
I am looking for a house in Auckland now and have attended 2 auctions in the last week. It was almost like a buying frenzy with buyers not seeming to care what they pay. I presume their attitude was that someone will pay them more for their house later than they paid.
Politicians seem to have their heads in the sand over this as most have numerous rental properties.
While incomes are low and unemployment is relatively high I can only assume people are borrowing to the limit to buy housing. I know of a property investor who was lent 95% of the value of a house.
This bubble can only end in tears for many people who have borrowed too much in the hope that this propery bubble will continue.

Those who do not learn from the past....

Kiwis think it is different here. But it's not. The bubble will once again pop.

The prices in Auckland are ridiculous. Leaky homes, uninsulated homes and unscrupulous agents make it a mine field for any purchaser.

I am a professional person and I refuse to pay inflated prices for dodgy buildings on the North Shore. Immigrants (and I am one of them) have been conned into paying horrific prices for rubbish houses.

Auctions are, as stated by another reader, feeding frenzies for people petrified they won't be able to get on the property ladder. Mortgaging themselves to the hilt. This is definitely a disaster about to happen.

It is not sustainable. Incomes are low (don't fool yourself and think they aren't much better elsewhere) and accommodation is high. Soon it'll be linke London, with multiple families in one house. This is not the environment that is "sold" to professional immigrants by NZ Immigration.

And before readers tell me to "go home" - this is just an objective veiw based on living in many first world countries. It is a basic economic reality.

The Auckland City Council needs to be more pro-active about future planning. And squashing families into apartments is not the answer...

Affordability and supply/demand are two completely different things not to be confused. What we will continue to see is a polarisation of house prices. Those who are on good incomes will continue to pay what they need to in order to get the property that they want. This will have a 'rising lid' effect on the market, with those on lower incomes having to settle for less in terms of location/quality than they may have a year or so ago. Yes, this may include sharing houses or kids staying with Mum and Dad longer. Supply has virtually stopped, due to lack of 2nd tier finance companies, lack of 'willing' and able developers, and recent property tax changes (LAQC etc) and it will take a good 3-4 years for the supply side to ramp up again. This will inevitably create a bubble which is driven primarily by supply constraints instead of speculation or low interest rates. Even when interest rates increase, prices must continue to increase (simple economics) but again, the quality/location equation will change. Those on the higher incomes will still continue to pay what they need to, because they can, and those on lower incomes will settle for even less than they do now. Wisdom does suggest that those buying now should lock in their loans for 3 - 5 years, but say budget on 7% and put the balance of cash away in a 'buffer' account. However, given the continued weakness of the global economy and low nflation; with some picking deflation in economies with high levels of QE, I would suggest that RBNZ will not be able to even consider significant rate rises for a year or so. Affordable housing, that many are calling for, quoting examples from Australia, is not an option in N.Z. because we simply don't have the economies of scale. And the government (the taxpayer) certainly cannot and will not afford to provide further State-owned housing. Morever, the priority for housing is Christchurch. No simple answer but house-price growth is inevitable under the backward correction in 3-4 yrs time when supply starts to exceed demand, as it always does (standard systems theory).

From the global financial press:

During Q2 New Zealand has been negatively affected by a strong currency, weak economic outlook among its major trading partners, and the fear of a slowdown in global growth. The decline in the survey was fairly modest relative to recent pull backs in the data. The modest declines come at a surprise given the fact that the Euro-Zone crisis now posses more a threat to the health of the New Zealand economy than ever before. Recently many of the economies linked to the Euro-Zone have begun to cut interest rates, which hurt New Zealand trade advantaged. The effect to the New Zealand currency is compounded by the lower demand for New Zealand exports.

so go ahead and buy that house. In the end when interest rates go up and people can no longer afford to pay their mortgages, it will all come crashing down. The greater concern is DEFLATION and not inflation.

Trouble is NZ have economists taught by economists that were taught by economists and so on.
House prices are due to supply and demand. Simple.
Interest rates are part of the price. DOH!
If the "experts" think that prices are rising too fast, then they should raise the deposit required and raise/enforce the "dealers" tax.
Raising interest rates hurt those that are most productive in society.
And how stoopid is that???
But they do it. Why? because they were taught by economists that were taught by economist who in turn were taught by economists................. If it wasn't for the innate stupidity of our politicians, nobody would listen to them.