When a Housing Bubble Bursts: A Warning from Across the Ditch | The Bloomberg Australia Podcast

Ajouté : 2026-05-28

[00:00:02]Welcome to the Bloomberg Australia podcast. I'm Chris Burke coming to you from Melbourne. Australia's housing market may be cooling in some corners, but it's nothing compared with the property downturn that's unfolding across the Tasine after one of the world's biggest housing booms. New Zealand is now grappling with falling prices, weak demand, and real uncertainty about what comes next. So, what lessons does it hold for Australia?

[00:00:29]To unpack that and more, I'm joined this week by Ansley Thompson, Bloomberg's Wellington Bureau Chief. Angelie Kiora, >> Kiora, Chris, how are you?

[00:00:38]>> I'm good. Welcome back to the podcast.

[00:00:40]Always a pleasure to to have you on. Um, you have a great story out this week um about the uh what what I've just been uh talking about. Um, there's a great opening line in your story, uh, saying there's an old joke in New Zealand. You know, you're at a Kiwi barbecue when someone brings up house prices before the sausages are cooked. So, I take it that's that's the uh that's your equivalent of the Aussie barbecue stopper, which is how we refer to to uh house prices.

[00:01:11]>> I totally agree. I mean, that joke could be could be said in Australia, too, couldn't it? It's absolutely applicable to both countries, but in New Zealand, far less so at the moment.

[00:01:21]>> Yeah. So, let's let's talk about that.

[00:01:23]Um, for a long time, buying buying a house over there, uh, really was a one-way bet and prices just kept soaring to to stratospheric levels, it seemed like. What's happened?

[00:01:36]>> You're absolutely right. For I mean, it was almost three decades, prices just went up and up. There was the occasional little fall like in the you know the global financial crisis but otherwise it was just this upward track and everyone thought of it as you know a sure way to get maybe not rich but you know comfortably wealthy at least was through property in the co period and so from 2020 to about 2022 house prices just bmed at one point in 2021 they were up about 30% In one year alone >> 30% in one year.

[00:02:15]>> In one year unfortunately for me I bought a house in 2020 but anyhow we won't we won't discuss that.

[00:02:22]>> Take that offline.

[00:02:23]>> Yeah.

[00:02:24]>> They were absolutely booming.

[00:02:26]>> Then interest rates started rising and the economy just kind of slowed down. At first it was it was gradual. Prices started sort of dipping a bit but they just haven't stopped. And now, you know, four years later in Wellington, we're down 27%.

[00:02:44]As the in the country as a whole, we're down about I think it's 16% is the latest the latest figure. And it's really not showing any any signs at all of picking up. It looks like for the rest of the year, it's going to be at the best flat, but probably more likely to be falling.

[00:03:02]>> Yeah, that's um that's really uh quite amazing. A 16% slump. I mean, that's a lot, but 27% in Wellington, that's that's massive. Um, what's what's been the impact on on the economy?

[00:03:18]>> It's been brutal. That's the best way to describe it. I guess the main drivers of the economy here for for years and years and years really has been rising property and immigration. And in the last few years, we haven't had those two big drivers. So, it has been painful.

[00:03:35]the wealth effect that you get from rising house prices when that evaporates it's so so blatant. Suddenly people, you know, they don't feel wealthier. They haven't got that little dopamine hit for looking at, you know, their house value and seeing it's risen by 10,000 or whatever since they last looked. They're less likely to go out for dinner.

[00:03:56]They're less likely to to put in a new kitchen. So all that kind of stuff just drops away. For the construction industry, it's been particularly painful. We've had more than 2,000 construction companies liquidated since 2022. For architects, I think they were saying it's the worst it's been in 50 years for architecture firms. It just kind of keeps rolling on through the economy, these effects.

[00:04:20]>> Yeah. and and your uh your feature this week um examines that in terms of like offers the the example of New Zealand as as a cautionary tale, I suppose, in terms of what happens when uh a housing boom unwinds cuz we haven't really seen that happen um elsewhere in in in these hot housing markets yet. Um, so what kind of warning does this offer to to to other to those other countries which have those seemingly unstoppable housing markets?

[00:04:53]>> I mean, the first warning is, and we're told this always, but none of us believe it, I think, is that, you know, they house prices aren't just guaranteed to go in one direction. They they can, of course, fall as well. But I think the other thing that we're really learning here in New Zealand is when house prices are almost in an uncontrollable state.

[00:05:13]Nobody wants that. You know, it's it's not good for anyone. It's hard for people to get on the property ladder.

[00:05:18]It's unsustainable. And we're certainly seeing that here now.

[00:05:23]But to make house prices more affordable, falling prices is extremely painful. and the effect it has on the wider economy is profound. And so I guess you know many countries want to have affordable housing. It's it's a thing that everyone looks for. Um President Trump has been saying it a lot as well in the US. And in the article we look at what's happening in the US. Trump says that he doesn't want this to happen through house prices decreasing because he knows the pain that comes with it and he knows that he'll lose voters if that happens.

[00:05:59]>> Yep.

[00:06:00]But it's very difficult for it to happen without prices falling. So yeah, I mean I think the only real way is if if you increase supply and on a on a sort of a slow basis and also if borrow borrowing costs are lower but it's very hard to achieve those things and I don't think many if any countries have managed to do it.

[00:06:24]>> Yeah, it's um it's a big debate unfolding. Well, it's it's always been a big debate in Australia. um the the housing market kind of demand versus supply um which uh what what the best solutions are. It's Australia's housing market is looking a bit precarious right now I would say. Um you know you've seen that auction clearance rate uh in Sydney slumping to its lowest level since the pandemic recently. Um, and look, you know, we've also reported this week that that banks are starting to re in mortgage lending criteria because of those uh changes in the budget uh uh in in May when um the government scrapped negative gearing for for home buyers except on new builds. And that's, you know, that's that's that's already starting to have uh an effect um on auctions. And um you know, I was just uh looking at something last night on telly when uh you know, and investors are no longer uh well investors were certainly not turning up to to many auctions over the weekend anyway. Um so how do our two markets compare in that respect? Are they are there is there a combination of factors that's unique to New Zealand or can you actually compare the two markets?

[00:07:38]>> I think you can to an extent. Certainly a few years ago when they were both really strong, we were comparing them and we were almost talking about them not quite as if they were one market but they they had very similar characteristics and then since then New Zealand has diverged considerably from from Australia. Um here investors haven't really come back into the market to the extent that they they used to be the sort of mom and dad investors uh scared off. I would say it's it's rents are falling. So, you know, that makes it very difficult to to you know, want to invest in in property if you if you can't even cover the mortgage, you know, that's makes it a difficult proposition.

[00:08:21]>> Yeah. But, you know, um uh on the other hand, I guess this could be some people could look on this as a buying opportunity. Um could uh could Australians kind of potentially get in the act? a nice a nice Victorian villa overlooking Oriental Bay in Wellington or or a getaway on those those golden beaches on on the north shore of Oakland maybe.

[00:08:44]>> Well, absolutely. And Australians and Singaporeans are free to buy in New Zealand. You don't have to um spend at least 5 million like other other nationalities do. So, you can come over here >> easily and buy property for sure. And there are some bargains. I mean, it is worth remembering that when we talk about the New Zealand property market, there is pockets that have continued to do okay. And the main one, and it's probably the place where people want to live, is Queenstown. Queenstown has held up relatively well compared to other parts of the country. But some of the beaches, absolutely, there's bargains to be had on the beaches for sure. Um, and yeah, Australians are welcome. They can come over, spend their money.

[00:09:27]>> Might have to get my credit card out.

[00:09:28]There's also that uh that strong Australian dollar which uh which which works in our favor as well. Well, or should I say weak New Zealand dollar.

[00:09:42]>> Isn't this also potentially a good thing for first-time buyers in New Zealand? Is this offering a chance for younger Kiwis to to get on that ladder?

[00:09:49]>> It is. At the moment, firsttime buyers are at close to the highest level they've ever been. So that over 27% of the market is firsttime buyers. There is one big caveat with that and that's the fact that the market activity is low. So there's not a lot of there's not a lot happening in the market. So there's not necessarily a huge number of first home buyers, but they are making up a bigger portion of the buyers that are there. In places like Wellington, and it has been particularly bad in Wellington um the market, >> I think they're making up 37% of the market, which is quite extraordinary.

[00:10:24]So, yes, absolutely. The firsttime buyers who are willing to take the plunge um definitely have got a much better shot of getting the house that they want. But one really interesting thing that is happening in the New Zealand market is that younger people no longer see real estate as this shorefire way to win, you know, win in life. They um are looking at other investments. are much more likely to be invested in um shares and overseas equities in particular um in their Kiwi saver, which is the equivalent of the Australian super funds, etc. Um then they are to to buy property. They've been put off.

[00:11:03]They've been a bit burnt. They've seen some of their friends lose considerable sums of money and they are much much more hesitant to get involved. And there's also the sense that prices could keep falling. So if they just hang on a bit longer, they might get a a better deal.

[00:11:20]>> Yeah, that dynamic um you mentioned is really interesting and it's also um apparent here. It's become more apparent especially after the budget when um I think um almost an um or unexpected um uh fallout from the budget was we suddenly learned that young people um are bigger investors than maybe we assumed um for those same reasons. uh and uh they've been getting pretty angry about the government's uh changes to capital gains tax laws um on things like um uh shares etc. Um but look, how much does all this actually matter in the long run? Are prices just couldn't prices just potentially go back up? I mean and also are we likely to see an impact on the election? You've got one coming up um towards the end of this year.

[00:12:15]It's the long-term impact of what has happened is really interesting and it will take some time to play out. Some of the people I spoke to did um talk about it almost in the terms of the share crash in in the late 80s that really affected people in New Zealand and put a generation kind of like our parents' generation. It put them off investing in the share market because a lot of them lost their kind of their nest eggs and so they were very hesitant. They're saying that the same may happen with real estate in New Zealand. It's just sort of putting off that younger generation from investing certainly from investing maybe to you know buying a place to live is a different story and that is I think what the policy makers want to see the property market become in New Zealand that people buy a house to live in not necessarily buy a house to invest in. So therefore, it's it's easier for everyone to buy a house rather than just a few.

[00:13:15]And also means that people will diversify their investment. So they won't solely be in property. They'll also be invested in Kiwi Saver and have equity funds and all sorts of things, you know, and invest directly in businesses. even it will I think the idea is that it will financially strengthen the New Zealand economy if it plays out the way they would like it to.

[00:13:40]The other question you asked was about the election and this is this is so interesting because prices at the moment are lower than when the current government came in and that is a really uncomfortable position for a government especially a centerright government.

[00:13:55]They don't want that. But interestingly, some of the politicians have been making noises about or not making noises have been stating outright that they don't necessarily want prices to keep rising.

[00:14:07]So, or go back to that that path that they were on. So, it's it's very interesting as to what is going to happen. We were expecting something to kind of happen this year to maybe try and spark a bit of a recovery in the housing market. One thing that did happen was in Oakland there were plans to increase the densification and especially in the sort of inner city wealthy suburbs and that was partially rolled back partly because people were conscious of the fact that it would lower um house prices in those areas and that was you know pressure on politicians um from their from their the voters. So yeah some things are happening. whether or not they'll have prices back higher than when they came in. I mean, it's very unlikely unless there's some big rally in the next few months. And yeah, it is difficult when people's main source of wealth is is diminishing.

[00:14:57]>> Hley Thompson, thank you for joining us on this week's Bloomberg Australia podcast. I look forward to seeing you on my next trip to Wellington.

[00:15:05]>> Absolutely. I can take you around some open homes and find your bargain.

[00:15:09]>> I look forward to it. If you found today's conversation insightful, be sure to follow the Bloomberg Australia podcast wherever you listen and check more reading on Australia's economy, politics, and people at bloomberg.com.

[00:15:22]This episode was recorded on the traditional lands of the Warandre people. It was produced by Paul Allen and edited by Hinsley Chandler. I'm Chris Burke and we'll see you next week.