Hi Steve,

I agree that the movement of unemployment is ESSENTIAL for the near term movement in house prices.

The outlook for prices is a difficult thing – especially since construction is at such a low level currently.

I see little upside to prizes as wages are constrained by all kinds of downward pressures: atomised worker / employer relationships, rising unemployment already underway, the additional and continuing cumulative effect of ongoing outsourcing of New Zealand jobs to other countries. These same forces undermine the sort of security many people would require in order to actually carry out a mortgage regime without default.

If unemployment continues to rise, people won’t be buying homes, they will be trying to sell them. That would tend to push prices down. At the same time, these people would need somewhere else to live so the rental market will heat up at the lower end, which may see more money go into investment houses and thus maintain prices to some extent.

There are lot variables, but broadly, I think if a lot of people lose their jobs the price of houses will be static or fall further. As many have said, the impact of the crash elsewhere may only be beginning to be felt here. Time will tell how bad that gets.

On a much more subjective note, I look around at the houses on offer and see what I’d be getting for my money and I think to myself: “I’m not paying that kind of money for THAT even if interest rates are low at this / for a moment”. The housing stock is pretty run down and was always – most of it – cheap and nasty on the day it was built, a description that applies equally to a house built recently or one built 30 years ago. Small bedrooms, one toilet, tiny gardens thanks to sub-division, poor finishing and cowboy/DIY “maintenance”.