A Kiwi Perspective on Housing

I chatted over IM with my friend in New Zealand yesterday about housing and gained an international perspective on the housing boom (and bust at least in the U.S.) In Auckland, the price of houses jumped 16% in a year, indicative of a dramatic upward trend for the last five years. The pressure my friend feels to buy in now before the prices rise too much out of her economic reach is eerily reminiscent of the atmosphere in California before the subprime meltdown. The average price of a Kiwi house in June was $557,546 versus the median household income of approximately $51,094, numbers that look positively Los Angelean. This article points out the rapid rise in housing is hardly contained within the U.S and may be closely tied to what happens over here in our neck of the world.

The rise in prices is worrisome because the international housing boom is a byproduct of globalization. The economic links act as a self-reinforcing network that has fueled the global surge in house prices but would also be likely to magnify the pain on the way down. The ripples would extend well beyond the housing markets. A fall in American house prices, for example, would crimp consumer spending - and free-spending Americans have supported growth in many export-minded nations. If house prices drop and American consumers are forced to tighten their belts, buying fewer imports, China and other nations would have to slow their dollar investments, driving interest rates higher and higher. That could hurt housing markets from Paris to Shanghai to Auckland.