New Zealand Economy? Q: When will the housing bubble burst? A: Before 2017.

The question that is on everyone’s minds is: New Zealand Economy? Q: When will the housing bubble burst?

My view is that it will be before 2017.

Please note: I am not a financial analyst and/or am making any claim of financial advice. Seek the advice of professionals in this area. This blog is purely my opinion.

Why do I think there will be a correction soon. Lets examine the cards:

1. Non-sustainable National Mortgage Debt Levels: The article today in Stuff (27th July 2016) about the total debt. Read it here. I quote directly from this article which indicates that the total private borrowing on houses is nearly higher than the value of our economy: “Mortgage lending has ballooned to record levels as rising national house prices fuel a new wave of borrowing. KPMG’s quarterly survey of financial institutions showed mortgage lending reached a new high of $227.7 billion, up $8.4b since December. In comparison, the size of New Zealand’s economy was $250 billion, measured by gross domestic product.“
2. Change in New Zealand Government: The tide seems to be turning against John Key. Labour and the Greens are getting married. It looks to be a happy union. Their first task will be to bring in severe measures to kill the over inflated housing market. Even banks have started now with measures to reduce mortgage risk. The social effects is too great and something needs to be done urgently.
3. Political Instability in the USA: Everyone expects Clinton to get in. But what will happen if Trump wins? Even now not everyone is happy with Clinton.  The USA seems to be in a confused dis-stable state. Result = increased interest rates.
4. Global Instability: A further driver for the increase in interest rates. The so called terror attacks seem frequent in Europe.
5. Global Warming More Than  A Reality: We are beyond the argument. Its more than a reality. We could have gone beyond the tipping point. This new reality will create significant instability. Traditionally, houses close to the water are expensive. In the new reality this pricing model is flipped.