New Zealand’s largest economic sector – residential real estate – had a banner year in 2021. Our extension of the RBNZ M10 series suggests the value of all housing in the country could have reached $1.675 tln by the end of 2021, or 4.8 times larger than our annual economic activity as measured by GDP. (In 2020 it was 4.3x, in 2019 it was 3.7x.)
For more than a decade since the availability of the data starting in 1990, housing was valued at about 2x annual economic activity. It got its first spurt higher as a consequence of the Clark/Cullen 39% top tax rate, then settling in to about 3x GDP. A new frenzy started about a decade later which took it to about 4x GDP. And now we look to be in yet another push higher, pushing on towards 5x annual economic activity. Another 39% tax rate is now in place, and the shelter real estate gains provide is clearly attractive.
And the funding of all this and its growth didn’t miss a beat during all the pandemic hurdles of the past year, even the past two years.
Over the past year, this mortgage debt owed to banks has grown by +10.7%. In 2020, that growth was +8.2%. In 2019 it was +6.9%. Momentum built in 2021. Prices rose at a faster rate, +24% in 2021 vs +19% in 2020 and +12% in 2019. Further, house-selling transaction volumes are increasing – the churn – and were +9.4% higher in 2021, compared with +6.4% in 2020 and actually a -1% .
The concentration of the New Zealand economy around a single sector has intensified. We collectively owe 93.1% of all annual economic activity to banks in the form of mortgages; 94.5% if you include the housing debt owed to non-bank payday loans near me Painesville Ohio lenders.