Why peace caused the housing crisis
Post the 1950’s, the world has lived in relatively peaceful times. Yes there have been terrorist attacks. The Korean, Vietnam and Gulf wars. But it’s nothing that has threatened the overall safety of the world’s population. In fact, despite everything, we’ve always felt the human race has everything under control. But our complacency has left us vulnerable. And this black swan event, in the Coronavirus, is now our everyday reality.
From the boomers to the millennials we were ill-prepared for what unfolded this year. Outside of smaller outbreaks in Africa and Asia, most world leaders had never experienced anything like a widespread health crisis, or a pandemic. From an economic standpoint, some might say the GFC somewhat prepared us economically. But losing your livelihood is a very different feeling to the potential of losing your life.
We end this decidedly average year taking a look back at how we ended up here.
Short sightedness and three-year terms
The problem with short sightedness is that knee jerk reactions generally come at the expense of long-term planning and good quality policy. The “housing crisis” didn’t just arrive. It’s been a slow-moving train for decades. One that’s been in and out of our consciousness depending on the state of the housing market. And one which cannot be addressed effectively in a three-year term. To fix the current situation requires an all of government approach. Once that may take many years to effect positive change. Yes, there will be ups and downs, but it is important that projects are not derailed by political point scoring and clickbait headlines.
Government v RBNZ
The housing crisis has gone from being a problem to a major issue. This has never been highlighted more strongly than in the open letter from the Finance Minister to the Reserve Bank. Tinkering around brightline tests and LVR’s and banning foregoing buyers has done nothing to solve our problem. Through it all, house prices have continued to rise. But it’s up to the Government to create policy to address this issue. The mandate of RBNZ is to control inflation and employment, not the housing market. Good policy or hard policy is the only thing can address the current situation. But again, this is in conflict with the desire of successive governments to attain or remain in power.
Forest fires are naturally occurring events which play a role in encouraging new growth. Even in Australia, which was devastated by devastating bush fires, is abundant with new growth 12 months on.
Just like the bush, human beings are resilient and will often emerge from adversity stronger and better off. But it has become common place for Governments to intervene when we are on the brink of financial crisis. They do it to protect their people from financial harm but if often interferes with the natural market cycle. If no lessons are learnt, then we are prone to repeat the same mistakes again and again.
Right now, it’s hard to go an hour without a discussion or media report on house prices. There are conversations with friends who sold for hundreds of thousands more than expected, and property miracle prices across the country. Even small sleepy towns are in on the act. These good news stories drive people to real estate as they get a sense of FOMO (fear or missing out), which in turn stokes the market even more. And so it continues.
The Wellington Market
In January this year it would be impossible to guess where the market has ended up. Now the market price for a basic three bedroom in a good suburb is hovering around the million-dollar mark. So, where to from here? Employment is going to be the big indicator for 2021. Strong employment will fuel the market and if, god help us, we have another interest rate drop – then we will likely experience a second wave of activity.
If we have learnt anything form this year it’s that you should never try and predict anything. Just ask 99.9% of the world’s economists.
With that said, that is us for another year. The team would like to wish you the very happiest and healthiest of festive seasons and a safe return in 2021. Thanks again for your ongoing support. Bring on the vaccine!
Ben, Amanda and the team x
Wellington Market Quick Stats:
What’s on this December in Wellington?
Orchestra Wellington Christmas Singalong, 13 DEC 2020, Michael Fowler Centre, 111 Wakefield Street
From Mariah Carey and Justin Beiber, to Wham! and All I Want for Christmas, this festive season Orchestra Wellington is dishing up all of our favourite Christmas carols with their hour-long singalong special.
Fun for kids and adults alike, the event kicks off at 2:30pm at the Michael Fowler Centre and sees these talented musicians breathe life into timeless classics and modern hits. If you’re taking kids along, head to the pre-show entertainment of bouncy castles and face painting at 1:30pm in the Renouf Foyer.
A Very Silly Christmas Comedy Show, 19 DEC 2020, Fringe bar, 26 Allen Street
Twas the week before Christmas, and all through the house, not a creature was stirring – apart from the thunderous laughter coming from A Very Silly Christmas Comedy Show!
Ho, ho, ho and ha, ha, ha! Come on down to Fringe Bar this silly season for a jolly, holly and definitely ‘lol’y night out. Expect antics, improv, silly songs and ugly jumpers aplenty. It’s a festive, filthy, funny and fabulous extravaganza not to be missed.
Ngā Rama Wherikoriko Pō Night Lights & Christmas Market, 18 – 20 DEC 2020, Old Government Buildings, 15 Lambton Quay
Heritage New Zealand Pouhere Taonga proudly presents Old Government Buildings Night Lights and Christmas Market. Enjoy over three nights as New Zealand’s largest wooden building is lit up in celebration of Christmas with twilight markets.
Spend an evening in the grounds of Old Government Buildings enjoying Christmas markets for last minute gifts, fun activities, live entertainment, food stalls and more.
If you, or anyone you know, could benefit from a considered market assessment by Wellington’s only licensed agent and registered property valuer, please do not hesitate to call. We are always happy to help.