Economists have warned that New Zealand’s property bubble could be set to burst. The housing market has grown to the point that the average house price in New Zealand is now $700,000. Now leading economist Harry Dent Jr is predicting that house market is on the brink of bursting and says that it’s time for the house market to return to reality.
In the past the economist has impressed with his accurate predictions, having previously accurately predicted that the Japanese economy would dramatically slow down for over a decade in the 1980s. Dent has pointed out that New Zealand has been experience some of their greatest growth in history but it is now time for the bubble to pop.
Over the last decade house prices in New Zealand have considerably outpaced income growth and have risen rapidly to unsustainable levels with many buyers now unable to get into the market due to over-inflated prices. With an economic downturn on the horizon it is likely that property prices will begin to reduce.
The countries banks will be vulnerable when the bubble does burst. Dent has predicted that the next boom time for the world will fall between2023 and 2036 but says that prior to then we will likely experience an ongoing recession.
Economists have said that although New Zealand and the world at large is likely to experience a few tough years ahead, a correction the property market is a good thing and long term will make it easier for new home owners to get into the property markets. Economists like Dent have pointed out that recessions are healthy and bring positive change to markets but have warned people to get as financially safe and secure as they can ahead of a long few years of downturn.