In a new analysis by Bloomberg Economics, New Zealand's inflated real estate prices have earned us the title of "frothiest" property market in the world. On Tuesday (NZ time), the news organization announced its latest 'bubble ranking,' averaging five criteria: price-to-rent ratio, price-to-income ratio, real price increase, nominal price growth, and yearly credit growth. عقارات
The higher the reading, the higher the chance of a correction, which, sadly for the OECD, appears to be more likely than ever. According to Bloomberg, ratios are greater than they were in the run-up to the global financial crisis of 2008. In Bloomberg's Property Bubble Gauges Flash 2008 Level Alert, economist Niraj Shah stated, "A mix of elements is propelling property prices to unprecedented levels worldwide."
"Record low interest rates, unprecedented government stimulus, tight savings waiting to be used as deposits, restricted housing supply, and prospects of a solid global recovery all play a role."
If things are terrible in the OECD, things are far worse in New Zealand.
We topped the rankings, ahead of other 'frothy' housing markets such as Canada, Sweden, Norway, the United Kingdom, Denmark, and the United States, thanks to a dismal performance across the five measures.
The bubble ranking from Bloomberg Economics.
Aotearoa received the lowest score of any country on four out of five criteria; we had the greatest price-to-rent ratio (211.1), price-to-income ratio (166.6), real price growth (13.2 percent), and nominal price growth (13.2 percent) (14.5 percent).
Only New Zealand's annual credit growth (6%) was not among the highest in the OECD, which was held by France (11.2 percent).
But, unlike in 2008, things aren't about to come crumbling down any time soon. Shah claims that risk metrics are high, interest rates are low, lending requirements are higher, and sensible policies are in place, despite the fact that risk metrics are high, interest rates are low, lending standards are higher, and conservative policies are in place.
According to Bloomberg, the coming era will "more likely be marked by cooling rather than collapse." In New Zealand, house prices have climbed considerably in the last year. In March, the government introduced a slew of new housing measures aimed at calming property speculation and assisting first-time buyers.
Despite the government's actions, the latest Quotable Value data reveals that the average property price grew 8.9% in the three months leading up to May.
Some experts believe property prices will continue to rise until interest rates rise, which one of the country's largest banks, ASB, predicts will occur in May.
According to ASB's newest economic projection, the property market is "unsinkable," with prices expected to rise another 10% this year.