“We’ve almost got the perfect storm,” says veteran fund manager Brian Gaynor as he reels off the many reasons New Zealand house prices and debt levels are soaring to precipitous heights.
There are many ingredients. But right now, New Zealand seems to have them all: not enough building, restrictions on development, surging migration, baby boomer savings, low interest rates and banks that are all too happy to lend for property investment.
“When you get the perfect storm like we did in the 1980s with the sharemarket, you see things just go up and up. People start to believe they will never fall,” he says.
“People didn’t believe the sharemarket would fall in the 80s. I’d come in from a trip to Australia and the guy at customs wouldn’t let me in unless I gave him sharemarket tips. It was just euphoria. Everyone was talking about the sharemarket. Now everyone is talking about the property market.”
New Zealand’s gross debt is a whopping half trillion dollars; housing now accounts for $218 billion of that.