Housing policy curve balls and election inertia

But the bank says if its forecast for a 22% peak to trough drop in house prices is correct, affordability, as measured by house prices relative to incomes, won’t be anything to write home about any time soon.

On the bank’s outlook, house prices relative to household incomes are expected to improve (fall) beyond the levels that prevailed just before the pandemic, but not meaningfully. “In an absolute sense, this ratio is still high, and that means there are many kiwis who will still be locked out of the market,” says Sharon Zollner, ANZ’s chief economist.

“Many kiwis want to see housing become more affordable, but many don’t want to see their wealth deteriorate in the process. For those with significant debt levels, the prospect of negative equity will be feeling real right now - if they aren’t already there.”

Politicians are going to have to walk the line between the goal of improving affordability and the less-positive side of the ledger: reducing household wealth.