When you look at the economy it is important to discount the surface storms and look at long term trends. The stock market goes up and down. Interest rates are down, but real inflation is up. It is better to look for signs that deleveraging is finishing and there is real growth.,

And in NZ, this is not happening.

Banks taking advantage of the buoyant market and selling off old stock: expert. The number of mortgagee sales in the first half of this year is close to figures last seen in the recession in 2009.

But a property expert says the surge in forced sales is most likely banks selling off old stock and taking advantage of a lucrative seller’s market. In the first half of this year, there were 1129 mortgagee sales, up from 1007 for the same period last year, according to figures from property information company Terralink.

Terralink managing director Mike Donald said he expected to see the number of mortgagee sales continue to climb as there was no sign that economic conditions would improve soon. Twenty-two per cent of forced sales involved people losing their family home, rather than an investment property. “There’s no good news here for so called ‘mum and dad’ property owners,” said Mr Donald.”With properties that are likely to be family homes making up almost a quarter of sales, there’s no sign of economic recovery for ordinary New Zealanders,” he said.

via Mortgagee sales near 2009 levels – Business – NZ Herald News.

What has happened instead is that as the property prices have increased (basically in line with inflation — the real value has not, and this is very much an Auckland phenomenon) then the banks are trying to clear stock and break even on the loans they have made. [There is a problem with geography. Auckland has two harbours and has limited room to grow outwards — the periphery is now one hour out of rush hour away from the centre (and two hours in rush hour), This means there is an artificial shortage of housing].

Housing remains unaffordable in Auckland. The average nice house is close to a million dollars: the average wage is well under 100 000. Couples making around 100 000 — 200 000 between them are trying to manage mortgages which take half their after tax combined income.  There is no room for job loss, illnesses or pregnancy.

What should happen is that property prices fall, and this has happened elsewhere in the country. But Auckland instead is inflating a bubble in weak economic conditions. It is a good time to rent. It is a good time to sell. It is a very bad time to buy.